Petition for Writ of Certiorari — Mama Jo’s, Inc., dba Berries, Petitioner v. Sparta Insurance Company

APPENDIX TABLE OF CONTENTS

OPINION AND ORDER

Opinion of the United States Court of Appeals for

the Eleventh Circuit (August 18, 2020) ............. 1a

Omnibus Order of the United States District

Court for the Southern District of Florida

(June 11, 2018) ................................................. 23a

OTHER DOCUMENTS

Sparta Insurance Policy— Relevant Excerpts ...... 49a

Common Policy Declarations ........................... 50a

Schedule of Forms and Endorsements ............ 52a

Schedule of Locations ....................................... 56a

Common Policy Conditions .............................. 57a

Notice to Policyholders Risk Management

Plan Florida ...................................................... 60a

Commercial Property Coverage Part

Supplemental Declarations ............................. 61a

Commercial Property Coverage Part

Extension of Supplemental Declarations ........ 63a

Building and Personal Property Coverage

Form .................................................................. 65a

Business Income (and Extra Expense)

Coverage Form ............................................... 108a

Exclusion of Loss Due to Virus or Bacteria ... 135a

Causes of Loss – Special Form....................... 137a

Water Exclusion Endorsement ...................... 165a

APPENDIX TABLE OF CONTENTS (Cont.)

Windstorm or Hail Exclusion......................... 167a

Loss Payable Provisions ................................. 169a

Business Income Changes-Time Period ........ 174a

Florida Changes ............................................. 178a

Commercial General Liabiality Coverage

Part Supplemental Declarations ................... 186a

Commercial General Liabiality

Coverage Schedule ......................................... 189a

Liquor Liability Coverage Part Declarations 191a

Total Pollution Exclusion Endorsement ........ 193a

Fungi or Bacteria Exclusion .......................... 194a

Silica or Silica-Related Dust Exclusion ......... 197a

Exclusion–Asbestos Advisory Notice to

Policyholders................................................... 199a

Exclusion–Lead Advisory Notice to

Policyholders................................................... 200a

Florida Changes–

Cancellation and Nonrenewal........................ 201a

Products/Completed Operations Hazard

Redefined ........................................................ 205a

Asbestos Exclusion ......................................... 207a

Lead Exclusion ............................................... 210a

App.1a

OPINION OF THE UNITED STATES COURT OF

APPEALS FOR THE ELEVENTH CIRCUIT

(AUGUST 18, 2020)

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

________________________

MAMA JO’S INC., D/B/A BERRIES,

Plaintiff-Appellant,

v.

SPARTA INSURANCE COMPANY,

Defendant-Appellee.

________________________

No. 18-12887

D.C. Docket No. 1:17-cv-23362-KMM

Appeal from the United States District Court

for the Southern District of Florida

Before: NEWSOM, TJOFLAT, Circuit Judges,

and PROCTOR, District Judge.

PROCTOR, District Judge:

In this insurance coverage case, we are called upon

to assess whether the district court properly excluded

the opinions of Plaintiff’s experts and granted

Defendant’s motion for summary judgment based

 Honorable R. David Proctor, United States District Judge for

the Northern District of Alabama, sitting by designation.

App.2a

upon the conclusion that Plaintiff failed to establish

that it suffered a direct physical loss that would trigger

coverage. We conclude the district court correctly

ruled on both questions. Therefore, for the reasons

more fully discussed below, we affirm.

I.

Background

Appellant Mama Jo’s Inc. d/b/a Berries (“Berries”)

owns and operates a restaurant located at 2884 SW

27th Avenue, Miami, FL 33133. (Doc. 107-1 at 8-9).

The restaurant is located less than one mile from the

ocean (Doc. 111-5 at 4; Doc. 111-6 at 57-58, 104), and

is partially enclosed by a retractable awning, wall,

and roof system. (Doc. 109-4 at 4, 31; Doc. 109-5 at

66-68, 75-81; Doc. 110-8 at 104). When the system is

opened, the restaurant’s interior areas are exposed to

the elements. (Id.). The restaurant’s front entrance, bar,

and seating areas are adjacent to SW 27th Avenue.

(Doc. 107-1 at 95-97; Doc. 109-5 at 51-54, 66-71, 80;

Doc. 116-8 at 4-5).

A. The Road Construction

From December 2013 until June 2015, there was

roadway construction at different locations along SW

27th Avenue in the general vicinity of the restaurant.

(Doc. 102 at 2; Doc. 107-1 at 58-60; Doc. 116-5 at 11).

During that time, dust and debris generated by the

construction migrated into the restaurant. (Doc. 116 at

3-5; Doc. 110-3 at 51-55; Doc. 110-8 at 54; Doc. 116-8

at 3-7; Doc. 116-9 at 3-15, 19-29). Berries performed

daily cleaning using its normal cleaning methods,

employing dust pans, hoses, rags, towels, and blowers.

(Id.).

App.3a

Berries was open every day throughout the time

period of the roadwork. (Doc. 116 at 3-5; Doc. 110-8

at 56-57, 95-97; Doc. 116-8 at 7-10; Doc. 116-9 at 25).

Although the restaurant maintained the ability to

serve the same number of customers as it had before

the construction began, customer traffic decreased

during the roadwork. (Doc. 116 at 3-5; Doc. 107-1 at

73-74; Doc. 110-8 at 56-57; Doc. 116-8 at 9-12; Doc.

116-9 at 24-27).

B. The Insurance Policy

From September 19, 2013 to September 19, 2014,

Berries was insured by Appellee, Sparta Insurance

Company (“Sparta”). (Doc. 110-1 at 5, 31-54). Sparta

issued an “all risk” commercial property insurance

policy, which included, in relevant part, a Building

and Personal Property Coverage Form and a Business Income (and Extra Expense) Coverage Form.

(Doc. 110-1 at 31-54).

The Building and Personal Property Coverage

Form contained in the policy covers “direct physical

loss of or damage to Covered Property . . . caused by

or resulting from any Covered Cause of Loss.” (Id. at

31). The policy defines “Covered Causes of Loss” as

“Risks of Direct Physical Loss unless the loss is” excluded or limited. (Id. at 33, 63).

The policy’s Business Income (and Extra Expense)

Coverage Form provides that Sparta will pay for “the

actual loss of Business Income you sustain due to the

necessary ‘suspension’ of your ‘operations’ during the

‘period of restoration.’” (Id. at 46). The policy provides

that the “‘suspension’ must be caused by direct physical

loss of or damage to” covered property. (Id.).

App.4a

C. The Initial Insurance Claim

On December 12, 2014, Berries submitted a claim

to Sparta under the policy. (Doc. 143 at 4). Berries

asserted that the claim was related to dust and

debris generated by the roadway construction. (Id.).

Sparta assigned Corey Buford, an insurance adjuster,

to review the claim on behalf of Sparta. (Doc. 116-10

at 5). Berries hired a public adjuster, Robert Inguanzo

of Epic Group Public Adjusters, to assist with its

claim. (Doc. 110 at 3).

In December 2014 and January 2015, Buford

requested information about the claim from Berries.

(Doc. 116-10 at 6-8, 17-19). In January 2015, Inguanzo

responded to these requests and informed Buford

that the claimed loss “occurred as early as December

of 2013 in the form of construction debris and dust

from the [roadwork]” and that, “the construction related

debris and dust . . . caused damage to the insured’s

building. The scope of loss includes but is not limited

to, cleaning of the floors, walls, tables, chairs and

countertops.” (Id. at 17).

In March 2015, Inguanzo provided Berries with

an estimate in the amount of $16,275.58 to clean and

paint the restaurant. (Doc. 110-10 at 1-10; Doc. 116-11

at 11-15, 23-25; Doc. 116-12 at 5-6). Inguanzo testified

that, “based on our inspection back then” the estimate

encompassed “the work that we felt was necessary to

bring the property to its pre-loss condition includ[ing]

the cleaning and painting,” and that, “[a]t that time,

we didn’t have anything for removal or replacement.

. . . ” (Doc. 116-11 at 14-15).

In April 2015, Inguanzo sent Buford a “Sworn

Statement in Proof of Loss” for the building claim,

App.5a

including a preliminary damage estimate in the

amount of $13,775.58. (Doc. 116-10 at 21). This amount

was calculated based on the amount of the estimate–

$16,235.58–minus a deductible. (Id.). Inguanzo also

sent Buford a “Sworn Statement in Proof of Loss”

and supporting documentation regarding a business

income claim in the amount of $292,550.84. (Id.).

Berries contended that its 2014 sales were lower

than expected when compared to its rate of sales

growth in previous years. (Doc. 109-2).

On January 30, 2017, Sparta denied the claim

because it was “not covered under the [] policy.” (Doc.

110-13). As Sparta explained: “[w]ith regard to Building

coverage, . . . the Proof of Loss Form does not reflect

the existence of any physical damage. It is also questionable whether a direct physical loss occurred.”

(Doc. 110-13 at 5). Sparta also stated that:

Under the Business Income Coverage Form,

coverage is provided for the actual loss of

business income the insured sustains due to

the necessary “suspension” of “operations”

during the “period of restoration.” The “suspension” must be caused by direct physical

loss of or damage to property at the premises. . . .

(Doc. 110-13 at 6) (emphasis in original).

App.6a

D. The Litigation and Presentation of a New

Claim for Damages

Berries initiated this action in Florida state court

in May 2017. (Doc. 1-2). Sparta removed the action to

the United States District Court for the Southern

District of Florida based on diversity jurisdiction.

(Doc. 1). In its initial disclosures in the lawsuit,

Berries claimed the same damages it had before the

suit was filed: $16,275.58 for cleaning and painting

the restaurant, and $292,550.84 for lower-thanexpected sales in 2014. (Doc. 20 at 4).

On February 26, 2018, Berries also served

amended answers to interrogatories. (Doc. 116-5 at 8).

In those responses, it identified for the first time new

categories of damages totaling $319,688.57. (Id.).

Berries contended that the newly claimed damages

were due to replacement of the restaurant’s awning

and retractable roof systems, HVAC repairs, and

replacement of the restaurant’s audio and lighting

systems. (Id. at 8-9).

1. Berries’ Experts

Berries relied on three experts to causally link

its newly-claimed damages to the construction dust

and debris generated more than two and a half years

earlier, i.e., during Sparta’s policy period ending on

September 19, 2014. First, Alex Posada offered opinion

testimony about Berries’ audio and lighting systems.

Second, Christopher Thompson opined about the

awning and retractable roof systems. Third, Alfredo

Brizuela proffered his opinion about “engineering”

and “the cause and origin of the loss.” (Doc. 105-1 at

5-6; Doc. 113 at 2-4).

App.7a

a. Alex Posada

Posada’s firm, United Audio, had “been in the

audio and special lighting industry for over 15 years

providing integrated audio, video, lighting & control

solutions. . . . ” (Doc. 109-1 at 2). Posada’s proposed

methodology included performing a “QC diagnostic”

which would have involved, among other things,

“[d]ismantl[ing] all Audio & Lighting Equipment,

. . . [t]est[ing] all existing wiring and terminations[,]

[d]isassembl[ing] each and every speaker and

lighting fixture[], [t]est[ing] all audio devices[, and]

[e]xamin[ing] all components in every lighting fixture.”

(Id. at 2-3; Doc. 108-1 at 51-53). However, Posada did

not perform the QC diagnostic. (Doc. 108-1 at 53).

Rather, in February 2018, he performed a two-hour

site inspection and concluded that “it [wa]s more cost

effective to replace the system.” (Id. at 24-34).

At Posada’s deposition, the following exchange

occurred:

Q:

So is it fair to say if you want to find out a

specific reason why a speaker or light is not

working, you have to run this diagnostic? [ ]

A:

It’s an option.

Q:

What other options are there?

A:

There are no other options . . . it[’]s either this

or replace it which, I mean—as of looking at

it, I can already tell you it’s not going to be

worth doing this.

Q:

If you want to find out the specific reason why

a subwoofer or speaker or light is not

working, do you need to perform the diagnostic?

App.8a

A:

It’s an option. Yeah

Q:

But are there any other options?

A:

No, there is no other option.

Q:

That’s the only option?

A:

That is correct.

(Doc. 108-1 at 55-56). Posada’s inspection consisted

of visually observing some of the system’s audio and

lighting components, and listening to some of its

audio components. (Doc. 109 at 3; Doc. 108-1 at 51-53).

Posada did not inspect all of the restaurant’s

speakers and components because some were out of

reach and, during his inspection, there were patrons

in the restaurant whom he did not wish to disturb.

(Doc. 108-1 at 24-25, 31-39). He only walked around the

perimeter of the restaurant. (Id. at 34). Posada testified

that the speakers outside the restaurant’s entrance

were “probably” damaged, and although he did not

inspect the subwoofers, he assumed that they were not

working. ( Id . at 43, 68-69). Posada nevertheless

testified that all of Berries’ audio systems were

damaged by construction dust and debris, to the exclusion of all other causes, because they produced sounds

that were “tedious,” “distorted,” and “hard to explain

in words.” (Id. at 88, 93-94).

Posada’s inspection of Berries’ lighting system

involved observing components from ground level,

about 15 feet below the fixtures. (Id. at 45). Posada

testified that the lights did not turn on at all and

were “full of dust.” (Id. at 33, 44-45). Although he

opined that the light fixtures’ motherboards were

damaged, Posada conceded that he could not see

those components, and did not inspect them. (Id. at

App.9a

87-88, 97-98). He did not know the age of the lighting

fixtures, or when they stopped working. (Id. at 76, 87).

b. Christopher Thompson

Thompson is employed by Awnings of Hollywood,

the company that originally installed the awnings

and retractable roof “several” (i.e., “more than three

[-] four”) years before his inspection. (Doc. 108-3 at

17-18, 32-33). Thompson’s inspection of the restaurant’s

awnings and retractable roof consisted of a visual

inspection from the ground floor, and lasted approximately one hour. (Doc. 108-3 at 29, 34, 83). His inspection took place more than two years after the roadwork ended. (Id. at 26-29, 34-37). He did not take

notes. (Id. at 34). Based on his one-hour inspection,

Thompson concluded that the awnings and retractable

roof systems were damaged beyond repair by sediment that he “assumed” was construction dust. (Id. at

46, 54; Doc. 109-3 at 1). Thompson took no samples

of the sediment, and did no testing to determine its

origin. (Doc. 108-3 at 45-46). Thompson had eaten at

the restaurant during the road construction. (Doc.

108-3 at 46).

Thompson did not test the retractable roof system

because he observed that the drive belt was broken.

(Doc. 108-3 at 69). But, the belt was the only thing

Thompson observed that was broken. (Id. at 69-70).

In his report, Thompson noted that the system had

to be replaced, rather than repaired, because the

components were no longer available in the United

States. (Doc. 109-3 at 1; Doc. 108-3 at 69). When asked

why the drive belt snapped, Thompson testified: “I

could not tell you. I have an opinion, but I couldn’t

tell you seriously.” (Doc. 108-3 at 71).

App.10a

c. Alfredo Brizuela

Brizuela has a degree in architecture and structural engineering, and is a Florida licensed civil and

structural engineer. (Doc. 108-5 at 26-27). His inspection of the restaurant consisted of a one-hour visual

inspection conducted in December 2017 and a review

of photographs taken in 2014 and 2015. (Doc. 108-5

at 42, 76-77). He also ran his “fingers across” dust

(which he believed was construction dust), although

it had been over two years since the construction had

been completed. (Doc. 108-5 at 45, 57-59, 115, 154).

Based on this inspection, he offered the following

opinion:

[I]t is evident that the source of the damage

was from the nearby roadway construction

on 27th [A]venue in front of the property.

Simply stated, the migration of the dust

and its resulting paste was a sudden and

accidental occurrence that damaged the

equipment, awning, windows, railings, and

stucco.

(Doc. 109-5 at 7). Brizuela’s report explains how construction dust combined with water can be corrosive.

(Doc. 108-5 at 117). But, on the question of the source

of the corrosive material in this case, Brizuela acknowledged that his “testing was strictly [his] observation

through [his] inspection and [his] review of the photographs.” (Doc. 108-5 at 116). That is, Brizuela did

nothing other than touch the dust and look at pictures before opining as to its origin. (Id.). His opinion,

like Thompson’s, was based on his assumption that

the construction dust was the source of the corrosive

material. (Id.).

App.11a

2. The District Court’s Decision Ruling on

the Motions in Limine Regarding Berries’

Experts

In April 2018, Sparta filed a motion to preclude

the testimony of Plaintiff’s expert witnesses: Posada,

Thompson, and Brizuela. (Doc. 105). That same day,

the parties filed Cross Motions for Summary Judgment.

(Docs. 106, 110). After briefing, the district court

entered an omnibus order granting Sparta’s Daubert

and summary judgment motions. (Doc. 146). The district court found that, although Berries’ causation experts were minimally qualified to render their opinions,

their methodologies on the issue of causation were

unreliable or nonexistent, and their testimony was

speculative. (Id. at 5-15). The district court further

concluded that, without expert testimony, Berries could

not prove that construction dust and debris generated

in 2014 caused the “new” damages (first claimed in

2018) to Berries’ awnings, retractable roof, HVAC

system, railings, and audio and lighting system. (Id.

at 15-17).

The district court determined that Berries’ initial

claim for cleaning was not covered because property

that must be cleaned, but is not damaged, has not

sustained a “direct physical loss.” (Id. at 17-19). The

district court also concluded that direct physical loss

refers to tangible damage to property, which causes

it to become unsatisfactory for future use or requires

repairs. (Id. at 17-19). Finally, the district court decided

that Berries’ claim for lower-than-expected sales in

2014 was not covered because Berries could not

establish that it suffered a “necessary ‘suspension’”

of its “operations” as the result of a “direct physical

loss.” (Id. at 19-20). Because of its determinations,

App.12a

the district court declined to address any of the

parties’ arguments related to the policy’s exclusions

or limitations. (Id. at 16, n. 14).

This appeal followed.

II.

Standard of Review

We review a district court’s order granting summary judgment de novo, “considering all of the evidence

in the light most favorable to the nonmoving party.”

Nesbitt v. Candler County, 945 F.3d 1355, 1357

(11th Cir. 2020). “Summary judgment is proper ‘if

the movant shows that there is no genuine dispute as

to any material fact and the movant is entitled to

judgment as a matter of law.’” Id. (quoting Fed. R. Civ.

P. 56(a)).

“We review for abuse of discretion a district court’s

evidentiary ruling under Daubert v. Merrell Dow

Pharmaceuticals, Inc., 509 U.S. 579 (1993).” Adams

v. Lab. Corp. of Am., 760 F.3d 1322, 1327 (11th Cir.

2014) (parallel citations omitted). “‘A district court

abuses its discretion if it applies an incorrect legal

standard, follows improper procedures in making the

determination, or makes findings of fact that are

clearly erroneous.’” United States v. Alabama Power

Co., 730 F.3d 1278, 1282 (11th Cir. 2013) (quoting

Chicago Tribune Co. v. Bridgestone/Firestone, Inc.,

263 F.3d 1304, 1309 (11th Cir. 2001)). The deference

we show on evidentiary rulings includes giving the

court “considerable leeway in deciding in a particular

case how to go about determining whether particular

expert testimony is reliable.” Kumho Tire Co., Ltd. v.

Carmichael, 526 U.S. 137, 152 (1999). Even where a

district court’s ruling excluding expert testimony is

“outcome determinative” and the basis for a grant of

App.13a

summary judgment, our review is not more searching

than it would otherwise be. Gen. Elec. Co. v. Joiner,

522 U.S. 136, 142-43 (1997).

III. Analysis

Berries argues that the district court erred in

three ways: first, by concluding that “direct physical

loss” does not include cleaning, but rather requires a

showing that the property be rendered uninhabitable

or unusable; second, by requiring Berries to show that

a suspension of operations was the result of physical

damage in order to establish business income coverage;

and third, in striking Berries’ causation experts. We

begin by addressing the exclusion of Berries’ experts

and then turn to the other two issues.

A. Exclusion of the Experts

In Daubert, the Supreme Court explained that

trial courts must act as “gatekeepers” and are tasked

with screening out “speculative, unreliable expert

testimony.” Kilpatrick v. Breg, Inc., 613 F.3d 1329,

1335 (11th Cir. 2010) (citing Daubert, 509 U.S. at

597). In that important role, trial courts may consider

a non-exhaustive list of factors including: (1) whether

the expert’s theory can be and has been tested; (2)

whether the theory has been subjected to peer review

and publication; (3) the known or potential error rate

of the technique; and (4) whether the technique is

generally accepted in the scientific community. Kilpatrick, 613 F.3d at 1335. Later, in Kumho Tire, the

Court explained that the gatekeeping function governs

all expert testimony, including “scientific, technical,

or other specialized knowledge,” not just singularly

scientific testimony. 526 U.S. at 147-49. The factors

App.14a

identified in Daubert “do not constitute a definitive

checklist or test.” Kumho, 526 U.S. at 150 (internal

quotation marks omitted). Admittedly, they are

designed to guide a district court’s assessment of the

reliability of scientific or experience-based expert

testimony. Id. But, the district court’s “gatekeeping

inquiry must be tied to the facts of a particular case.”

Id. (internal quotation marks omitted). The goal of

gatekeeping is to ensure that an expert “employs in

the courtroom the same level of intellectual rigor

that characterizes the practice of an expert in the

relevant field.” Id. at 152.

Federal Rule of Evidence 702 provides:

A witness who is qualified as an expert by

knowledge, skill, experience, training, or

education may testify in the form of an

opinion or otherwise if:

(a) the expert’s scientific, technical, or other

specialized knowledge will help the trier of

fact to understand the evidence or to determine a fact in issue;

(b) the testimony is based on sufficient facts or

data;

(c) the testimony is the product of reliable

principles and methods; and

(d) the expert has reliably applied the principles

and methods to the facts of the case.

F.R.E. 702. “We have distilled from Daubert, Kumho,

and Rule 702 these three requirements: First, ‘the

expert must be qualified to testify competently

regarding the matter he or she intends to address’;

second, the expert’s ‘methodology . . . must be reliable

App.15a

as determined by a Daubert inquiry’; and third, the

expert’s ‘testimony must assist the trier of fact

through the application of expertise to understand the

evidence or determine a fact in issue.’” Kilpatrick,

613 F.3d at 1335.

To be sure, experience, standing alone, is not a

“sufficient foundation rendering reliable any conceivable

opinion the expert may express.” U.S. v. Frazier, 387

F.3d 1244, 1261 (11th Cir. 2004). Even experienced

experts “must explain how that experience leads to

the conclusion reached, why that experience is a

sufficient basis for the opinion, and how that experience

is reliably applied to the facts.” Id. at 1261 (quoting

Fed. R. Evid. 702 advisory committee note (2000

amends.)). “[N]othing in either Daubert or the Federal

Rules of Evidence requires a district court to admit

opinion evidence that is connected to existing data

only by the ipse dixit of the expert.” Joiner, 522 U.S. at

146.

1. Alex Posada

The district court found that Posada, the audio and

lighting expert, was qualified, but concluded that his

methodology was unreliable. (Doc. 146 at 7, 10). We

agree. Berries failed to establish that Posada’s methodology was reliable.

Posada listened to the audio system and looked at

the lighting system in 2018. From this brief inspection, he opined that any damage was caused by construction dust and debris from 2014. Posada identified

what he thought to be the only diagnostic test to

determine the reason why a speaker or light would

not work, but he did not perform that test because “it

[wa]s more cost effective to replace the system.” (Doc.

App.16a

108-1 at 24-34, 55-56). Posada performed no testing

that would permit him to conclusively determine that

the dust he observed in 2018 came from much earlier

road construction. To the extent it can be said that

Posada even identified a methodology for reaching

his conclusions, he provided no testimony (or anything else) from which the district court could have

concluded that his methodology was in any way

reliable. See Kilpatrick, 613 F.3d at 1335 (the expert’s “methodology . . . must be reliable”). Nothing

about Posada’s methodology is capable of being tested

or being subjected to peer review, and Berries presented no evidence indicating that Posada’s technique

is generally accepted in the scientific community.

Kilpatrick, 613 F.3d at 1335.

Under Daubert, a “district judge asked to admit

scientific evidence must determine whether the evidence is genuinely scientific, as distinct from being

unscientific speculation.” Chapman, 766 F.3d at 1306.

Here, the district court did not abuse its discretion in

determining that Posada’s testimony provided nothing

more than speculation about the cause of the damage

to the audio and lighting systems.

2. Christopher Thompson

The district court found that Thompson was at

least minimally qualified as an expert based on his

years of experience, but concluded that “Thompson’s

testimony is nothing more than unexplained assurances

and unsupported speculation.” (Doc. 146 at 12). Again,

we agree. Berries did not establish that Thompson’s

opinions are reliable.

Like Posada, Thompson merely visually inspected

the awnings and retractable roof, and did not do so

App.17a

until more than two years after the road construction.

(Doc. 108-3 at 26-29, 34-37). Thompson observed a

broken drive belt on the retractable roof, but candidly

admitted he could not say what caused it to break.

(Doc. 108-3 at 71). Although Thompson did not test

the retractable roof system, he determined that it

had to be replaced. (Doc. 109-3 at 1). This conclusion

was based on Thompson’s knowledge that parts for

this system could no longer be obtained in the United

States. (Id.). And, although Thompson performed no

testing on the sediment on the awnings and retractable

roof two years after the construction ended, he nonetheless opined that it came from that construction. (Id.;

108-3 at 27, 44-45).

Again, to the extent that Thompson even employed

a methodology, there was nothing against which that

methodology could be compared to determine whether

it was reliable or even scientific in nature. See Chapman, 766 F.3d at 1306 (recognizing the court must

ensure the “evidence is genuinely scientific, as distinct from being unscientific speculation.”). Therefore, the district court did not abuse its discretion in

excluding Thompson’s testimony as unreliable.

3. Alfredo Brizuela

Berries offered Brizuela as a cause and origin

expert. He opined as to the source or origin of the

damage to the restaurant. Brizuela opined that “[i]t

is evident that the source of the damage was from

the nearby roadway construction on 27th [A]venue in

front of the property.” (Doc. 109-5 at 7). In reaching

this conclusion, he conducted a visual inspection of

the restaurant, again over two years after the road

construction ended. He conducted no sampling or

App.18a

testing of the dust and sediment he found at that

time. His “methodology” was simply observation and

a review of photographs. (Doc. 108-5 at 116).

Brizuela gave a scientific explanation about the

general issue of how dust and debris can damage

property. But, even if one accepted the general

proposition that construction dust and debris can

damage or corrode property, Brizuela did not actually

attribute any damage to the restaurant as a result of

that circumstance. (Doc. 146 at 12-15). His “methodology” in this respect consisted of an assumption.

Therefore, we conclude that the district court did not

abuse its discretion in excluding Brizuela’s proposed

testimony as unreliable under Daubert.

Here, given its considerable leeway in assessing

expert testimony, the district court did not err in concluding that Berries failed to establish that its experts’

methodologies have been (or, for that matter, can be)

tested. Berries also failed to show that its experts’

methodologies have been subjected to peer review and

publication. Berries also failed to address the known

or potential error rates of its experts’ techniques. And,

Berries failed to establish that its experts’ techniques

are generally accepted in the scientific community.

Simply stated, Berries did not satisfy any of the

factors which indicate a reliable and admissible expert

opinion. Accordingly, the district court did not abuse

its discretion in excluding the experts. See Kilpatrick,

613 F.3d at 1335.

The district court correctly excluded the expert

opinions proffered by Berries and this inexorably led

to the swing of the summary judgment axe. “[A]n

insured claiming under an all-risks policy has the

burden of proving that the insured property suffered a

App.19a

loss while the policy was in effect.” Jones v. Federated

Nat’l Ins. Co., 235 So. 3d 936, 941 (Fla. 4th DCA

2018) (citation omitted). Berries relied on the expert

reports of Brizuela, Thompson, and Posada to prove

that the “new” damages to Berries’ awnings, retractable roof, and audio and lighting system, first claimed

in 2018, were caused by construction dust and debris

from 2014. That is, it was necessary for Berries to tie

the damages it claimed in 2018 to construction

occurring during the much earlier policy period, ending

on September 19, 2014. Without the properly excluded experts’ testimony, the district court properly

granted Sparta summary judgment on Berries’ newly

claimed damages.

B. Berries Failed to Show Any “Direct Physical

Loss or Damage”

Under Florida law, the interpretation of an

insurance contract, including resolution of any ambiguities contained therein, is a question of law to be

decided by the court. Dahl–Eimers v. Mutual of

Omaha Life Ins. Co., 986 F.2d 1379, 1381 (11th Cir.

1993) (citing Sproles v. Amer. States Ins. Co., 578 So.

2d 482, 484 (Fla. 5th DCA 1991)). In construing an

insurance contract, a court must strive to give every

provision meaning and effect. Auto-Owners Ins. Co.

v. Anderson, 756 So. 2d 29, 34 (Fla. 2000); Excelsior

Ins. Com. v. Pomona Park Bar & Package Store, 369

So. 2d 938, 941 (Fla. 1979). A party claiming coverage

(here, Berries) generally bears the burden of proof to

establish that coverage exists. U.S. Liab. Ins. Co. v.

Bove, 347 So. 2d 678, 680 (Fla. 3rd DCA. 1977). The

policy at issue is an “all risks” policy. However, as the

Florida Supreme Court has noted, “an ‘all-risk’ policy

is not an ‘all loss’ policy, and thus does not extend

App.20a

coverage for every conceivable loss.” Sebo v. Am. Home

Assurance Co., 208 So. 3d 694, 696-97 (Fla. 2016)

(citation omitted).

Berries’ initial claim had two components: one

for cleaning the restaurant, and another for Business

Income Loss. (Doc. 110-10). The insuring agreement

in the policy’s Building and Personal Property Coverage

Form states that Sparta “will pay for direct physical

loss of or damage to Covered Property . . . caused by

or resulting from any Covered Cause of Loss.” (Doc.

110-1 at 31). The policy’s Business Income Coverage

Form provides that Sparta will pay for “the actual

loss of Business Income you sustain due to the

necessary ‘suspension’ of your ‘operations’ during the

‘period of restoration.’” (Id. at 46). The “‘suspension’

must be caused by direct physical loss of or damage

to” covered property. (Id.).

Florida’s District Court of Appeals for the Third

District has addressed the definition of “direct physical

loss”: “A ‘loss’ is the diminution of value of something

[]. Loss, Black’s Law Dictionary (10th ed. 2014).

‘Direct’ and ‘physical’ modify loss and impose the

requirement that the damage be actual.” Homeowners

Choice Prop. & Cas. v. Maspons, 211 So. 3d 1067,

1069 (Fla. 3d DCA 2017); see also Vazquez v. Citizens

Prop. Ins. Corp., 2020 WL 1950831, at *3 (Fla. 3d

DCA 2020).

With regard to the cleaning claim, Berries’s public

adjuster, Inguanzo, testified that “cleaning and painting” was all that was required. (Doc. 76-1 at 35-36).

He also testified that there was no need for removal

or replacement of items at that time. (Id. at 36).

Based on this testimony, the district court held that

Berries had failed to establish that it had suffered a

App.21a

“direct physical loss” as that term is defined under

Florida law. (Doc. 146 at 18-19). We conclude that

the district court correctly granted summary judgment on Berries’ cleaning claim because, under Florida

law, an item or structure that merely needs to be

cleaned has not suffered a “loss” which is both “direct”

and “physical.” See Maspons, 211 So. 3d at 1069

(recognizing that “damage [must] be actual”); Vazquez,

2020 WL 1950831, at *3 (same). See also Universal

Image Prods., Inc. v. Fed. Ins. Co., 475 F. App’x 569,

573 (6th Cir. 2012) (“[C[leaning . . . expenses . . . are not

tangible, physical losses, but economic losses.”); MRI

Healthcare Ctr. of Glendale, Inc. v. State Farm Gen.

Ins. Co., 187 Cal. App. 4th 766, 779, 115 Cal. Rptr. 3d

27, 37 (2010) (“A direct physical loss ‘contemplates an

actual change in insured property.”); AFLAC Inc. v.

Chubb & Sons, Inc. (2003) 260 Ga.App. 306, 581

S.E.2d 317, 319 (same).

As to the Business Income Loss claim, the Business

Income Coverage Form requires that a “suspension”

of operations “be caused by direct physical loss of or

damage to property.” (Doc. 110-1 at 46). Again, as discussed above, even if Berries had shown a “suspension”

of operations, Berries did not put forward any Rule 56

evidence that it suffered a direct physical loss of or

damage to its property during the policy period. Therefore, the district court’s entry of summary judgment

on Berries’ Business Income Loss claim was also

proper. Berries failed to show it suffered a “direct

physical loss.”

App.22a

C. Berries Did Not Establish That It Suffered a

Covered Suspension of Operations

The policy’s Business Income Coverage Form

provides that Sparta will pay for “the actual loss of

Business Income you sustain due to the necessary

‘suspension’ of your ‘operations’ during the ‘period of

restoration.’” (Id. at 46). Berries argues that the district court erred when it held that Berries did not

suffer a “suspension” of its operations, and when it

ignored evidence that Berries had been required to close

sections of the restaurant for cleaning. Conceivably,

a slowdown caused by closing parts of the restaurant for

cleaning could be attributed to a “period of restoration.” But, even if Berries is correct that the district

court got this part of the analysis wrong, Sparta was

still entitled to summary judgment on the Business

Income Claim because any “‘suspension’ must be

caused by direct physical loss of or damage to property.”

Berries failed to show it suffered a “direct physical

loss.” (Id.).

IV. Conclusion

For the foregoing reasons, the district court’s

grant of summary judgment in favor of Sparta is

AFFIRMED.

App.23a

OMNIBUS ORDER OF THE UNITED STATES

DISTRICT COURT FOR THE SOUTHERN

DISTRICT OF FLORIDA

(JUNE 11, 2018)

IN THE UNITED STATES DISTRICT COURT FOR

THE SOUTHERN DISTRICT OF FLORIDA

________________________

MAMA JO’S, INC. D/B/A BERRIES,

Plaintiff,

v.

SPARTA INSURANCE COMPANY,

Defendant.

________________________

Case No. 17-cv-23362-KMM

Before: K. Michael MOORE,

Chief United States District Judge.

This cause came before the Court upon crossmotions for summary judgment. Defendant Sparta

Insurance Company (“Defendant” or “Sparta”) filed a

Motion for Summary Judgment (“Def.’s Mot.”) (ECF

No. 106) and Plaintiff Mama Jo’s, Inc., d/b/a Berries

(“Plaintiff”) filed a Motion for Partial Summary

Judgment (“Pl.’s Mot.”) (ECF No. 110).1 Also before

1 The Parties filed their respective responses and replies. See

(“Pl.’s Resp.”) (ECF No. 119); (“Def.’s Reply”) (ECF No. 125);

(“Def.’s Resp.”) (ECF No. 117); (Pl.’s Reply”) (ECF No. 124).

App.24a

the Court are two Daubert Motions.2 The motions are

now ripe for review.

I.

Background3

A. Factual Background

This case arises from a dispute regarding

insurance coverage of Plaintiff’s property located at

2884 SW 27th Avenue, Miami, FL, 33133 (the “Restaurant”) under a commercial insurance policy issued by

Defendant. The Policy (ECF No. 110-1)

i. The Policy

The Policy was in effect from September 19, 2013

to September 19, 2014. Pl.’s 56.1, ¶¶ 1, 4; Def.’s Resp.

56.1, ¶ 21. Only certain provisions of the Policy at

are issue. The Policy covers “direct physical loss of or

damage to Covered Property at the premises described

in the Declarations caused by or resulting from any

Covered Cause of Loss.” The Policy at 31. “Covered

Causes of Loss” means “direct physical loss unless

2 Defendant moved to exclude Plaintiff’s expert witnesses (“Def.’s

Daubert Mot.”) (ECF No. 105) and Plaintiff moves to exclude

Defendant’s expert witnesses. (“Pl.’s Daubert Mot.”) (ECF No. 111).

The Parties filed their respective responses and replies. See

(“Pl.’s Daubert Resp.”) (ECF No. 118); (“Def.’s Daubert Reply”)

(ECF No. 122); (“Def.’s Daubert Resp.”) (ECF No. 115); (“Pl.’s

Daubert Reply”) (ECF No. 120).

3 The undisputed facts are taken from the Amended Complaint

(“Am. Compl.”) (ECF No. 102); Plaintiff’s Statement of Facts (“Pl.’s

56.1”) (ECF No. 110); Defendant’s Resp. 56.1 (“Def.’s Resp. 56.1”)

(ECF No. 116); Plaintiff’s Reply 56.1 (“Pl.’s Reply 56.1”) (ECF

No. 123); Defendant’s Statement of Facts (“Def.’s 56.1”) (ECF No.

106); Plaintiff’s Resp. 56.1 (“Pl.’s Resp. 56.1”) (ECF No. 119),

and a review of the corresponding record citations and exhibits.

App.25a

the loss is” excluded or limited. Id. at 68. There is

additional coverage “to remove debris of Covered

Property caused by or resulting from a Covered Cause

of Loss that occurs during the policy period.” Id. at

33.

Under the Business Income Loss (and Extra

Expense) Coverage Form, Defendant “will pay for the

actual loss of Business Income you sustain due to the

necessary ‘suspension’ of your ‘operations’ during the

‘period or restoration’. The ‘suspension’ must be caused

by direct physical loss of or damage to property.” Id.

at 46.

ii. The Claim and Sparta’s Response

From December 2013 through June 2015, construction roadwork was performed at SW 27th Avenue,

the street adjacent to the restaurant. Pl.’s 56.1, ¶ 5;

Def.’s Resp. 56.1, ¶ 22; Def.’s 56.1, ¶ 9. During this

time, Plaintiff continually cleaned the restaurant.

Pl.’s 56.1, ¶ 7. In December 2014, Plaintiff notified

Sparta of its claims. Joint Pretrial Stipulation (“Stipulation”) (ECF No. 143) at 4. Corey Buford, an insurance

adjuster, was assigned to adjust the claim on Sparta’s

behalf and made requests for additional information

during December 2014 and January 2015. Def.’s Resp.

56.1, ¶¶ 33, 35. Plaintiff hired Epic Group Public

Adjusters (“Epic”) to assist it with its adjustment

claim for cleaning. Pl.’s 56.1, ¶ 8.4 In January 2015,

Robert Inguanzo, Epic’s representative public adjuster,

4 Robert Inguanzo of Epic assisted Plaintiff with its initial

claim submitted to Defendant. Frank Inguanzo also works for

Epic and provided a Rule 26 Report regarding damages alleged

by Plaintiff. Frank Inguanzo Report (ECF No. 105-6).

App.26a

responded to Buford’s request for additional information, stating that the loss “occurred as early as December of 2013 in the form of construction debris and dust

from the road work” and that in terms of damages,

“the construction related debris and dust . . . caused

damage to the insured’s building. The scope of loss

including but is not limited to, cleaning of the floors,

walls, tables, chairs and countertops.” Id. at ¶¶ 25,

34, 36.

In March 2015, Epic provided Plaintiff with an

estimate of $16,275.58 for cleaning, painting and

striping the parking lot. Pl.’s 56.1, ¶ 9; Def.’s Resp.

56.1, ¶ 9.5 In April 2015, Robert Inguanzo sent a letter

to Buford with a “preliminary damage estimate” for

$16,275.58 and a corresponding “Sworn Statement in

Proof of Loss” for $13,775.58 (i.e., the amount of the

estimate minus a $2500 deductible) and a loss of

business income claim for $292,550.84. Pl.’s 56.1, ¶ 9;

Def.’s Resp. 56.1, ¶¶ 9, 37. In January 2017, Sparta

sent Plaintiff a letter stating that the claims presented “are not covered under the subject SPARTA

policy . . . ” Pl.’s 56.1, ¶16, Ex. M. at 5.

B. Procedural Background

After Plaintiff was denied coverage, Plaintiff

filed its claim in Florida State court on May 19,

2017 against Defendants Sparta, Prohost USA, Inc.

(“Prohost”) and Buford, which Sparta removed to

federal court in the Southern District of Florida on

5 This estimate for cleaning was the result of a March 2015

inspection of the property by LCD Estimators. Def.’s Resp. 56.1,

¶ 38.

App.27a

September 6, 2017 based on diversity jurisdiction.6

Notice of Removal (ECF No. 1). Plaintiff voluntarily

dismissed Defendants Buford and Prohost. See (ECF

Nos. 63, 64). On October 11, 2017, Plaintiff claimed

$16,275.58 of damages for cleaning in its initial disclosures. (ECF No. 20). On February 26, 2018, Plaintiff amended its disclosures to identify new categories

of damages and a new damage total of $319,668.57.

(ECF No. 101-5).7 In the Amended Complaint, Plaintiff

alleges one count of breach of contract against Sparta,

the only remaining Defendant, for denial of coverage.

II.

Legal Standard

Summary judgment is appropriate where there

is “no genuine issue as to any material fact [such]

that the moving party is entitled to judgment as a

matter of law.” Celotex Corp. v. Catrett, 477 U.S.

317, 322 (1986); Fed R. Civ. P. 56. A genuine issue of

material fact exists when “a reasonable jury could

return a verdict for the non-moving party.” Anderson

v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). “For

factual issues to be considered genuine, they must

have a real basis in the record.” Mann v. Taser Int’l,

Inc., 588 F.3d 1291, 1303 (11th Cir. 2009) (citation

omitted). Speculation or conjecture cannot create a

genuine issue of material fact. Cordoba v. Dillard’s,

6 “In a contract action, a federal court sitting in diversity jurisdiction applies the substantive law of the forum state.” Tech.

Coating Applicators, Inc. v. U.S. Fid. & Guar. Co., 157 F.3d 843,

844 (11th Cir. 1998).

7 The new damages included Cleaning, Concrete & Asphalt,

Electrical, HVAC, Roofing (awning, roll-up curtains, retractable

roof, and related motors, electronics, hardware, etc.), audio and

lighting systems, and replacement of the lighting system.

App.28a

Inc., 419 F.3d 1169, 1181 (11th Cir. 2005). The moving

party has the initial burden of showing the absence

of a genuine issue as to any material fact. Clark v.

Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991).

In assessing whether the moving party has met this

burden, the court must view the movant’s evidence

and all factual inferences arising from it in the light

most favorable to the non-moving party. Denney v.

City of Albany, 247 F.3d 1172, 1181 (11th Cir. 2001).

Once the moving party satisfies its initial burden,

the burden shifts to the non-moving party to come

forward with evidence showing a genuine issue of

material fact that precludes summary judgment.

Bailey v. Allgas, Inc., 284 F.3d 1237, 1243 (11th Cir.

2002); Fed. R. Civ. P. 56(e). “If reasonable minds

could differ on the inferences arising from undisputed

facts, then a court should deny summary judgment.”

Miranda v. B & B Cash Grocery Store, Inc., 975 F.2d

1518, 1534 (11th Cir. 1992).

III. Discussion

Defendant moves for summary judgment arguing

that Plaintiff’s alleged damages and business income

loss are not covered under the Policy. As a threshold

matter, the Court must determine whether Plaintiff

can prove “direct physical loss or damage” and thus

whether coverage exists under the Policy. Because

Plaintiff’s theory of liability hinges upon expert testimony and because the Court may consider only

admissible evidence on summary judgment, the Court

first addresses Defendant’s objections to the admissibility of Plaintiff’s causation experts.8

8 Expert testimony is required regarding proof of causation

“where a jury is asked to assess complex . . . scientific issues

App.29a

A. Daubert Standard

Rule 26(a)(2)(B) of the Federal Rules of Civil Procedure provides that expert disclosures be accompanied

by a written report, signed by the witness, containing

a complete statement of all opinions the witness will

express and the bases for those opinions. Fed. R. Civ.

P. 26(a)(2)(A), (B). Rule 702 of the Federal Rules of

Evidence provides that expert testimony is admissible

if

scientific, technical, or other specialized

knowledge will assist the trier of fact to

understand the evidence or to determine a

fact in issue, a witness qualified as an expert by knowledge, skill, experience, training,

or education, may testify thereto in the form

of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data,

(2) the testimony is the product of reliable

principles and methods, and (3) the witness

has applied the principles and methods reliably

to the facts of the case.

STMicroelectronics, Inc. v. SanDisk Corp., No. 05cv-45,

2007 WL 4386234 (E.D. Tex. Mar. 15, 2007). “Rule

702 compels the district courts to perform the critical

outside the scope of a layperson’s knowledge.” Small v. Amgen,

Inc., No. 17-cv-11440, 2018 WL 501354, at *3 (11th Cir. Jan. 22,

2018); see also Chapman v. Procter & Gamble Distrib., LLC,

766 F.3d 1296, 1316 (11th Cir. 2014) (applying Florida law and

affirming the district court’s decision on summary judgment

where plaintiff’s expert failed to meet the Daubert standard

and the plaintiff had no other expert to testify as to causation).

Plaintiff acknowledges that “causation is a central issue in this

case,” which “raises scientific and technical issues beyond a

juror’s ordinary knowledge.” Pl.’s Daubert Resp. at 15.

App.30a

‘gatekeeping’ function concerning the admissibility of

expert scientific evidence.” U.S. v. Frazier, 387 F.3d

1244, 1260 (11th Cir. 2004) (emphasis in original)

(citing Daubert v. Merrill Dow Pharm., Inc., 509 U.S.

579, 589, n.7, 597 (2006)). The court must also act as

gatekeeper with respect to the admissibility of technical expert evidence. Kumho Tire Co. v. Carmichael,

526 U.S. 137, 147 (1999). In determining the admissibility of expert testimony, the Court considers whether:

(1) The expert is qualified to testify competently regarding the matters he intends to

address; (2) the methodology by which the

expert reaches his conclusions is sufficiently

reliable as determined by the sort of inquiry

mandated in Daubert; and (3) the testimony

assists the trier of fact, through the application of scientific, technical, or specialized expertise, to understand the evidence or to

determine a fact in issue.

Finestone v. Florida Power & Light Co., No. 03-cv-

14040, 2006 WL 267330, *8 (S.D. Fla. Jan. 6, 2006)

(internal citations omitted). “The burden of laying

the proper foundation for the admission of the expert

testimony is on the party offering the expert.” Allison

v. McGhan Med. Corp., 184 F.3d 1300, 1306 (11th Cir.

1999).

i. Defendant’s Daubert Motion

Defendant moves to exclude the opinions of all

Plaintiff’s experts. For purposes of summary judgment,

the Court considers Defendant’s Daubert Motion as

to the following experts: (1) Alex Posada–damage to

audio and lighting systems; (2) Christopher Thompson–

damage to the awnings, roll-up curtains, retractable

App.31a

roof, and related motors, hardware and electronics;

and (3) Alfred Brizuela–causation and origin of

property damage. Plaintiff designated the testimony

of Posada, Thompson, and Brizuela to prove that the

construction dust caused the alleged damage to the

restaurant.9

1. Plaintiff’s Expert Alex Posada

Alex Posada is Plaintiff’s audio and lighting expert.

Defendant argues that Posada is not qualified and

his testimony on causation and damages is not reliable.

First, Defendant challenges Posada’s qualifications, arguing that Posada’s Rule 26 Report did not

include a resume or curriculum vitae and that Plaintiff

failed to show education, training, or experience that

would provide him with scientific, technical, or other

specialized knowledge to opine that roadway construction can and did cause damage to Plaintiff’s

audio and lighting systems in 2014. (“Posada Report”)

(ECF No. 105-3). Plaintiff contends that Posada has

extensive experience in the audio and lighting industry

and has assessed lighting and audio systems damaged

by construction dust and debris around twenty to

thirty times in the past. Posada Dep. (ECF No. 1081) at 98:21-99:8. An expert “may be qualified ‘by

knowledge, skill, experience, training, or education.’”

9 The Court will consider the Daubert motions only to the extent

necessary to resolve the pending Motions for Summary Judgment.

Johnson v. State Farm Fire & Cas. Co., No. 12-cv-00534, 2013

WL 4607548, at *2 (S.D. Ala. Aug. 29, 2013). Here, the Court

need not consider Frank Inguanzo’s opinions to determine

causation because at his deposition, Plaintiff’s counsel stipulated

that he will not offer any opinions on causation. Inguanzo Dep.

at 53:12-17.

App.32a

Bouton v. Ocean Props., Ltd., No. 16-cv-80502, 2017 WL

4792488, at *7 (S.D. Fla. Oct. 23, 2017). The Court

finds that Posada is qualified because of his experience

in the field.

Second, Defendant argues Posada’s testimony is

not reliable. Even a “supremely qualified expert cannot

waltz into the courtroom and render opinions unless

those opinions are based on some recognized scientific

method.” Beltran v. NCL Corp., Ltd., No. 13-cv24566, 2017 WL 4270618, at *4 (S.D. Fla. Sept. 26,

2017). Thus, a court must focus on the “‘reliability’ of

a proffered expert’s ‘sources and methods.’” Chapman,

766 F.3d at 1306.

Posada identified a reliable methodology, the

“QC diagnostic” test, to determine which components

of the audio system were damaged and which needed

to be repaired or replaced. See Posada Report at 3

(“The testing provides valuable diagnostic information

for detecting the root cause of the problem and

allows to determine if the system is repairable.”).

Posada testified that the QC Diagnostic test was the

only option to determine a specific reason why a

speaker or light was not working. Posada Dep. at

55:12–56:7.10 However, Posada did not perform the

10 Question (“Q”): “So is it fair to say if you want to find out a

specific reason why a speaker or light is not working, you have

to run this diagnostic?” Answer (“A”): “It’s an option” Q: “What

other options are there?” A: “There are no other options . . . its

either this or replace it which, I mean—as of looking at it, I can

already tell you it’s not going to be worth doing this.” Q: “If you

want to find out the specific reason why a subwoofer or speaker

or light is not working, do you need to perform the diagnostic?”

A: “It’s an option. Yeah” Q: “But are there any other options?”

A: “No, there is no other option.” Q: “That’s the only option?” A:

“That is correct.”

App.33a

QC diagnostic test. Id. at 53:21-24; 55:5-16, 55:19-22;

57:10-23.

Instead, Posada did a two hour walk-through at

the restaurant and conducted a visual and auditory

test in February 2018, over two years after the

roadway construction ended. Posada Dep. at 30:16.

Plaintiff argues Posada’s walk-through was sufficient

due to his years of experience and ability to determine

whether a speaker has been damaged by dust or

debris based on the unique sound the speaker makes.

Posada testified that he could tell it was construction

dust damage from listening to the speakers because

the sound was “tedious.” Id. at 88:12-89:6; 94:1-9.

Posada did not inspect the entire audio system because

some were out of reach and he did not want to disturb

the patrons who were having lunch. Id. at 24:18-24;

32:5-16.11 He inspected the back of some subwoofers,

which were located on the floor, and stated that he

“had a hard time taking the connector out, and that

is due to the corrosion and due to the dust.” Id. at

40:11-13. Posada stated that speakers can remain in

good condition for about ten years but admitted that

he did not know the age of the speakers. In fact,

Posada did not know when the speakers were installed

or when they stopped working. Id. at 77:3-10; 76:420; 87:1-9.

Posada also testified that the lights at the restaurant were not working and that the only things that

can cause damage to LED lighting are construction dust

11 Posada testified that he did not “walk in between the tables

. . . [s]o it was basically a walk-through around the perimeters

where [he] was able to walk and not disturb any guests.” Posada

Dep. at 34:7-11.

App.34a

and water. Id. at 44:1-2; 81:6-15. He observed the

ceiling lights from the ground level, about 15 feet

below the fixtures. Id. at 45:8-9. (“all the light fixtures

are all [15 feet or higher].”). Posada could not see the

motherboard from the floor and did not inspect the

motherboard of the light fixtures at the restaurant.

Id. at 97:19-98:11. He further testified that “there

was no way for [him] to grab a ladder to take a look

at these lights in close proximity to see if it’s really

the LED screen that’s not working or the lamp.” Id.

at 33:11-17.

Under Daubert, the “district judge asked to admit

scientific evidence must determine whether the

evidence is genuinely scientific, as distinct from being

unscientific speculation.” Chapman, 766 F.3d at 1306.

Posada concluded that the audio and lighting systems

were damaged by exposure to construction dust and

debris. Posada Dep. at 75:4-18. He did not review

any documents or photographs of the property before

or during his inspection. Id. at 31:1-12. In February

2018, Posada merely listened to the audio system–

while patrons were in the restaurant–and looked at

the lighting system from 15-feet below to conclude

that any alleged damage was caused by construction

dust and debris from the roadway construction in

2014. Defendant argues that this unverified causation opinion amounts to nothing more than inadmissible ipse dixit that regurgitates Plaintiff’s theory of

the case. Def.’s Daubert Motion at 5. This “Court

does not denigrate the use of visual inspections,”

Banta Properties, Inc. v. Arch Specialty Ins. Co., No.

10-cv-61485, 2011 WL 7118542, at *4 (S.D. Fla. Dec. 23,

2011). But here, Posada’s methodology was unreliable,

providing nothing more than speculation about the

App.35a

cause of the damage to audio and lighting equipment. Posada’s testimony is therefore excluded.

2. Plaintiff’s Expert Christopher Thompson

Defendant moves to exclude the testimony of

Thompson on the issue of damages to the awnings,

roll-up curtains, retractable roof, and related motors,

hardware and electronics arguing that he is not

qualified and the methodology used was unreliable.

First, Defendant challenges Thompson’s qualifications arguing that Thompson’s Rule 26 Report

(“Thompson Report”) (ECF No. 105-4) did not suggest

that Thompson has any specialized knowledge to

opine on whether construction dust can and did, in

fact, cause any property damage. Thompson has

worked in his family awning business for the past 30

years. Thompson Report at 10. The “qualification

standard for expert testimony is ‘not stringent,’ and

‘so long as the expert is minimally qualified, objections

to the level of the expert’s expertise [go] to credibility

and weight, not admissibility.’” Banta, 2011 WL

7118542, at *2. Furthermore, an expert may be qualified by “experience.” Bouton, 2017 WL 4792488, at *7.

Thompson is at least minimally qualified to render

an expert opinion from his years of experience.

Second, Defendant argues that Thompson’s opinions are unreliable “leaps of faith” unsupported by

evidence. Plaintiff argues that Thompson’s methodology was reliable because he conducted “visual testing”

and that the testimony would be helpful because the

damages involved “technical issues outside a juror’s

ordinary knowledge.” Pl.’s Daubert Resp. at 11.

App.36a

Thompson inspected the property for approximately one hour in February 2018. Thompson Dep.

(ECF No. 108-3) at 29:23-24. He concluded that all

the awnings, gear drives, and motors were damaged

from construction dust and debris and must be

replaced. Thompson Report at 1. The following deposition testimony is particularly relevant to the Court’s

determination that Thompson failed to use a reliable

methodology to support his conclusions:

Q: “The black sediment that you observed,

do you know what it was?” A: “In my opinion

it was debris from the road construction,

dirt.” Q: “What are you basing that on? A:

“I’m basing my opinions on awnings that I

did for many years and, you know, that

awning is filthy. I know what it was when

we put it up. I know what it looks like now,

so . . . ” Id. at 43:20-22; 44:14-20 (emphasis

added)

Q: “Other than the fact that you have eaten

at [the restaurant] and have seen roadwork

going on, do you have any other basis for

that opinion that that black sediment was

from the roadwork?” A: “Well, I’ve seen

several other awnings I did over the years

and, you know, it didn’t come with the

awning on, you know, when it was new. So

I’m just making that assumption that I’m

seeing the road. And I’ve been there several

times and the roof is closed and when you

open it up, there is dirt and particles flying

through the air when I have been there for

lunch. So to me, if you have a road and you

have –when I’ve been there and eaten lunch

App.37a

over the years and you have road debris

going on and your curtains are down, and

the dirt is flying, it leads me to believe that

that would be from there.” Id. at 45:1946:17 (emphasis added).

Thompson also testified that he observed discoloration

in the awnings but did not know whether that discoloration was caused by the sediment. Id. at 62:2025. When asked about alternative causes for the discoloration, Thompson did not know if it could have

been caused by salt or sap but testified that although

he did not know what the sediment was, he knew the

sediment could deteriorate the fabric. Id. at 117:6-16.

When asked if he knew when the sediment got on the

awning, Thompson responded “I sure don’t.” Thompson

Dep. at 54:11-13.

Thompson also inspected the retractable roof

and drive belt. The only component of the retractable

system that Thompson could confirm was broken

was the drive belt that opens and closes the roof but

he was unsure when the drive belt “snapped.” Id. at

47:1-12; 69:24-70:1; 71:12-13 (“Q: “Do you know why

it snapped in half?” A: “I could not tell you. I have an

opinion, but I couldn’t tell you seriously.”).

A district court enjoys flexibility in conducting

the reliability analysis and application of Daubert

factors in any “given case will depend . . . on the nature

of the issue, the expert’s particular expertise, and the

subject of his testimony.” United States v. Brown,

415 F.3d 1257, 1268 (11th Cir. 2005) (internal quotations omitted). Where “the proposed expert’s opinion

relies principally upon his experience and knowledge,”

the Court must be satisfied “that the witness has

appropriately explained how his experience leads to the

App.38a

conclusion he reached, why that experience provides

a sufficient basis for the opinion, and how that experience is reliably applied to the facts.” Clena Invs.,

Inc. v. XL Specialty Ins. Co., 280 F.R.D. 653, 663 (S.D.

Fla. 2012). While “absolute certainty is not required

from an expert,” Banta, 2011 WL 7118542, at *3,

“‘knowledge’ connotes more than subjective belief or

unsupported speculation.” Daubert, 509 U.S. at 590.

The Court finds that Thompson’s testimony is nothing

more than unexplained assurances and unsupported

speculation.

3. Plaintiff’s Expert Alfred Brizeula

Defendant challenges the qualification and reliability of Brizuela, Plaintiff’s causation expert who

opined that the roadway construction dust caused

damage to metal structures at Plaintiff’s restaurant.

First, Defendant challenges Brizuela’s qualifications arguing that Plaintiff has not provided any

credible evidence to show that Brizuela has the

education, training, or experience on this discrete

subject matter to assess whether roadway construction

dust can cause damage to the metal structures and

whether the roadway construction did, in fact, cause

damage to the metal structures. Brizuela has a

degree in architecture and structural engineering, is

a Florida licensed civil and structural engineer with

over thirty-three years of experience in assessing

commercial and residential properties for structural

and architectural damage, and has had experience

with dust “affecting cars at [his] construction sites,

affecting the finish and the metals on the cars.”

Brizuela Dep. (ECF No. 108-5) at 22:12-23:25; Brizuela

Qualifications (ECF No. 113-10). Because of Brizuela’s

App.39a

education and background, the Court finds that Brizuela is qualified.

Second, Defendant argues Brizuela failed to use

reliable methodology to support his testimony regarding

causation. Brizuela stated that construction dust “in

its simplest form, is a mixture of a [sic] small

particles from concrete (Portland cement and water)

and aggregate and limestone which is primarily

calcium carbonate.” Brizuela Report (ECF No. 105-5).

at 6. He stated that Portland cement “has distinctive

characteristics of its own as it is the basic ingredient

of concrete.” Id. at 6. Though Brizuela opined on

what concrete is generally made of and damage that

it can cause, he did not conduct any chemical testing

of the construction dust allegedly adhered to the

metal at the restaurant. Instead, he conducted a one

hour visual inspection of the restaurant in December

2017; over two years after the construction had

ended. Brizeula Report at 1; Brizeula Dep. at 57:5-58:6;

59:19-21; 115:24-115-4; 154:4-7 (“testing was strictly

the observation through . . . inspection and review of

[] photographs.”) His efforts to remove the alleged

“adhered paste during [his] inspection” involved

running his “fingers across it.” Brizeula Dep. At 116:510. Based on his inspection, Brizuela concluded that

“it is evident that the source of [any] damage was from

the nearby roadway construction.” Brizuela Report.

Brizuela stated in his report that the “migration

of the [construction] dust and its resulting paste was

a sudden and accidental occurrence that damaged”

the “windows, railings, paint and stucco” and the

App.40a

“awning structure.” Brizuela Report at 6-7.12 The

Court finds that Brizuela’s testimony is not based on

any methodology and further, any testimony regarding

the alleged damage would not be helpful to a jury

because Brizuela testified that: (1) he did not observe

any dust on the window frames during his inspection,

(Brizuela Dep. at 86:17-19); (2) he did not see any

damage to the stucco, (id. at 90:6-13); (3) he “observed

dust on the metal framing of the awning” during his

inspection in December of 2017–two years after the

construction ended–but found that the “awning had

yet to experience high levels of moisture which would

cake on [ . . . ] that dust and make it stick” and testified

that he has not seen any evidence of that on the

frame, (id. at 67:10-24); (4) he did not know whether

dust was caked on the awning structure because he

“didn’t get up that high to see if it was caked,” (id. at

93:2-8); (5) he observed some corrosion on the metal

railings but noted that “the finish is still in place. I

mean, there is some corrosion on the railings or in –

but that would–I would attribute that to natural

oxidation. If you look [at] . . . the area where there is

corrosion, it’s just, I would say, natural to that railing,”

12 Brizuela also testified that “the HVAC system, [ . . . ] And then

the fabric [on the awnings]” could also be damaged. Brizuela

Dep. at 73:1-6. This testimony is not helpful because Brizeula

testified that he had no opinions regarding the damage to the

HVAC system or audio and lighting and would not be giving his

opinion on other allegedly damaged property. Brizuela Dep. at

71:9 19 (he could not speak to the awning fabric because of “his

lack of experience with that fabric”); 69:20-70:14 (he did not

inspect the HVAC system and had no experience with audio

and lighting equipment); 92:4-14 (he was informed that the

retractable roof was not functioning but that he did not know

why); and 85: 19-22 (he was not rendering an opinion that dust

damaged the exterior walls).

App.41a

(id. at 94:2-7); and (6) the corrosion damage in his

Report “will” occur, but that “[c]orrosion damage

relating to the dust has . . . not occurred yet.” Id. at

94:16-24.

Relevant testimony from a qualified expert is

only admissible if the expert knows of facts which

enable him to express reasonably accurate conclusion

as opposed to conjecture or speculation. Vision I

Homeowners Ass’n, Inc. v. Aspen Specialty Ins. Co.,

674 F. Supp. 2d 1321, 1325 (S.D. Fla. 2009). Absolute

certainty is not required and expert testimony is

admissible when it connects conditions existing later

to those existing earlier provided the connection is

concluded logically. Id. Even if the Court accepts, as

Brizuela testified, that construction dust and debris

can generally cause damage to metal, his conclusions

are unreliable for the following reasons: (1) he did

not inspect some allegedly damaged items, (2) he did

not observe damage to some of the items claimed,

and (3) testified that that some damage had yet to

occur. Brizeula is unable to attribute damage to the

construction dust with any degree of certainty and

his testimony is therefore excluded.

B. Defendant’s Motion for Summary Judgment

Defendant moves for summary judgment arguing

that Plaintiff’s alleged “direct physical loss of or

damage” and business income loss are not covered

under the Policy. Defendant argues it is entitled to

summary judgment for several reasons including but

not limited to the following (1) Plaintiff’s expenses

associated with cleaning dust from building surfaces

and personal property do not constitute direct physical

loss or damage because the dust did not tangibly

App.42a

injure covered property; (2) Plaintiff cannot meet its

burden of showing that the alleged damage occurred

during the policy period; and (3) Plaintiff’s business

interruption claim fails because Plaintiff has not

sustained a suspension of operations for a period of

restoration caused by direct physical loss or damage.

Under Florida law, the interpretation of an

insurance contract is a matter of law to be decided by

the court. Adelberg v. Berkshire Life Ins. Co., 97 F.3d

470, 472 (11th Cir. 1996). Florida courts look at the

insurance policy as a whole and give every provision

its full meaning. State Farm Fire & Cas. Co. v.

Steinberg, 393 F.3d 1226, 1230 (11th Cir. 2004).

i. Direct Physical Loss or Damage

Plaintiff argues that the migration of dust and

construction debris from the roadwork adjacent to

the restaurant caused damage to the restaurant and

contends that this dust and debris constitutes “direct

physical loss” to the Property under the Policy.

Under the all-risk insurance Policy between Plaintiff

and Defendant, the insured must initially show (1)

that there was a relevant loss–here a “direct physical

loss or damage”–which (2) occurred within the policy

period. Sporting Prod., LLC v. Pac. Ins. Co., Ltd., No.

10-cv-80656, 2012 WL 13018367, at *10 (S.D. Fla. Jan.

6, 2012).13

First, with regards to Plaintiff’s new damages

alleged in the February 2018 disclosures for replacement of the restaurant’s awning and retractable roof,

audio systems, lighting systems, asphalt parking lot,

13 The Parties agree that the Policy is an “all-risk” insurance

policy. See Pl.’s Mot. at 8-9; Def.’s Resp. at 3.

App.43a

and HVAC systems, Plaintiff relies on the expert

reports of the excluded experts–Brizuela, Thompson,

and Posada,–in order to prove causation and damage.

While an expert is not necessary in all breach of

contract cases, here the crucial question whether

construction dust and debris caused damage to

Plaintiff’s property is not one a lay witness can

answer. Johnson, 2013 WL 4607548, at *11 (“While

it may be true that an expert is not required in all

breach of contract cases, here the crucial question—

whether the water damage came from ground water

accumulation or a roof defect—is not one a lay witness

can answer.”). “A person seeking to recover on an

insurance policy has the burden of proving a loss

from causes within the terms of the policy[,] and if

such proof of loss is made within the contract of

insurance, the burden is on the insurer to establish

that the loss arose from a cause that is excepted from

the policy.” Evanston Ins. Co. v. Haven S. Beach,

LLC, 152 F. Supp. 3d 1370, 1374 (S.D. Fla. 2015).14

Plaintiff carries the burden of proving causation

to show that there was a direct physical loss and

thus coverage under the Policy. Companhia Energetica

Potiguar v. Caterpillar Inc., No. 14-cv-24277, 2016

14 Defendant also argues that several exclusions and limitations

apply that would bar coverage if the Court were to attribute the

“loss or damage” to the construction dust and debris. These

include but are not limited to the following: “failure of power,

communication, water or other utility service supplied to premises,”

“wear and tear,” “marring or scratching,” “rust or other

corrosion, decay deterioration,” “mechanical breakdown,” that

the dust was a “pollutant,” and “failure to mitigate damages.”

Because the Court has determined that there is no coverage,

the Court need not address whether these exclusions apply.

App.44a

WL 7507848, at *13 (S.D. Fla. Aug. 1, 2016). Plaintiff

acknowledges that “causation is a central issue in

this case,” which “raises scientific and technical issues

beyond a juror’s ordinary knowledge.” Pl.’s Daubert

Resp. at 15.

The Eleventh Circuit affirmed a district court’s

grant of summary judgment on the basis of its exclusion of the expert’s testimony, where that testimony

was the only evidence on the issue of causation. Guinn

v. AstraZeneca Pharm. LP, 602 F.3d 1245, 1251

(11th Cir. 2010) Where a plaintiff cannot show

evidence that their loss is covered, a plaintiff “cannot

show [Defendant] breached the terms of the Policy by

refusing to pay their claim.” Johnson, 2013 WL

4607548, at *11. Here, without its experts, Plaintiff

cannot show that the construction dust and debris

from 2014 caused the alleged “direct physical loss” to

their awnings, retractable roof, HVAC system, railings,

and audio and lighting system. Thus, summary judgment is appropriate.

Second, with regards to Plaintiff’s initial claim

for cleaning,15 cleaning is not considered direct physical

loss. See e.g., Universal Image Prods., Inc. v. Fed. Ins.

Co., 475 F. App’x 569, 573 (6th Cir. 2012) (“[Plaintiff]

15 Robert Inguanzo, Plaintiff’s public adjuster, who assisted

Plaintiff in filing its original claim for coverage against Defendants,

testified that based on his initial inspection, at the time of the

request “the work that we felt was necessary to bring the

property to its pre-loss condition included the cleaning and

painting. Robert Inguanzo Dep. (ECF No. 76-1) at 35:22-36:1.

There was no need for removal or replacement of items at that

time. Robert Inguanzo Dep. at 36:4-7. The entire initial estimate

was for cleaning the restaurant. LCD Estimators (ECF No. 11010)

App.45a

seeks coverage for cleaning and moving expenses . . . as

well as lost business income. These are not tangible,

physical losses, but economic losses.”). A direct physical

loss “contemplates an actual change in insured

property then in a satisfactory state, occasioned by

accident or other fortuitous event directly upon the

property causing it to become unsatisfactory for future

use or requiring that repairs be made to make it so.”

MRI Healthcare Ctr. of Glendale, Inc. v. State Farm

Gen. Ins. Co., 187 Cal. App. 4th 766, 779 (2010); see

also AFLAC Inc. v. Chubb & Sons, Inc., 260 Ga. App.

306, 308, (2003).

Even if this Court were to adopt a more expansive

definition of “direct physical loss or damage,” Plaintiff

would not be entitled to coverage. Several courts

have held that “physical loss” occurs when property

becomes “uninhabitable” or substantially “unusable.”

See e.g. Port Auth. of New York & New Jersey v.

Affiliated FM Ins. Co., 311 F.3d 226, 236 (3d Cir.

2002) (“When the presence of large quantities of

asbestos in the air of a building is such as to make

the structure uninhabitable and unusable, then there

has been a distinct loss to its owner.”). Indeed, where

“[t]he structure continues to function—it has not lost

its utility . . . routine maintenance does not bring the

expense within first-party coverage.” Id.

Here, the restaurant was not “uninhabitable” or

“unusable.” In fact, the restaurant remained open

every day, customers were always able to access the

restaurant, and there is no evidence that dust had an

impact on the operation other than requiring daily

cleaning. See Def.’s Resp. 56.1, ¶ 26; Edmonson Dep.

(ECF No. 116-8), 39:12-19, 46:3-6, 63:17-22; Snider

Dep. (ECF No. 107-1) at 66:10-67:6. “The requirement

App.46a

that the loss be ‘physical,’ given the ordinary definition

of that term, is widely held to exclude alleged losses

that are intangible or incorporeal and, thereby, to

preclude any claim against the property insurer

when the insured merely suffers a detrimental economic

impact unaccompanied by a distinct, demonstrable,

physical alteration of the property.” See 10A Couch

on Ins. § 148:46 (3d. Ed. West 1998). The fact that

the restaurant needed to be cleaned more frequently

does not mean Plaintiff suffered a direct physical loss

or damage and thus, summary judgment is appropriate.16

ii. Business Income Loss (and Extra Expense)

Coverage

Sparta’s Business Income (And Extra Expense)

Coverage form covers “the actual loss of Business

Income you sustain due to the necessary ‘suspension’

of your ‘operations’ during the ‘period or restoration’.

The ‘suspension’ must be caused by direct physical

loss of or damage to property.” The Policy at 46.

16 Plaintiff also argues that the cleaning constituted “debris

removal.” Debris removal is not defined in the Policy. However,

the Policy covers expenses “to remove debris of Covered Property

caused by or resulting from a Covered Cause of Loss that occurs

during the policy period.” Id. at 33 (emphasis added). Removal

of debris from the collapse of a building is covered when the

debris was ‘Covered Property.’” Harbor Cmtys., LLC v. Landmark

Am. Ins. Co., No. 07-cv-14336, 2008 WL 2986424, at *5 (S.D.

Fla. Aug. 4, 2008) (“[R]emoval of debris from the collapse of

Building # 9 is covered because the collapse was a ‘Covered

Cause of Loss’ and the debris was ‘Covered Property.’”). Here,

the alleged debris removal was from dust and debris migrating

from the roadway construction–not from any “Covered Property.”

Plaintiff is not entitled to coverage for cleaning under this

portion of the Policy.

App.47a

Defendant argues that Plaintiff cannot prove any element of the Business Loss Income claim. Plaintiff

argues that its loss of income is intertwined with the

damage to the property and the allocation of its

recourses.

It is plaintiff’s burden to prove “entitlement to

business interruption insurance proceeds under the

insurance policy.” Dictiomatic, Inc. v. U.S. Fid. & Guar.

Co., 958 F. Supp. 594, 603 (S.D. Fla. 1997). Plaintiff

must prove (1) there was direct physical loss or damage

to covered property, (2) the damage was caused by a

covered cause of loss, (3) there was a necessary

“suspension” of the insured’s “operations,” (4) the

“suspension” was caused by the covered damage, (5)

there was an “actual loss of business income” during

a “period of restoration,” and (6) the “actual loss of

income” was caused by the “suspension” of “operations.”

Id. at 62.

As addressed above, Plaintiff has not established

a direct physical loss or damage. Plaintiff cannot

recover under the Business Income (And Extra

Expense) Coverage because Plaintiff cannot show

that there was any suspension of operations caused

by “physical damage.” See e.g. Ramada Inn Ramogreen,

Inc. v. Travelers Indem. Co. of Am., 835 F.2d 812,

814 (11th Cir. 1988) (“recovery is intended when the

loss is due to inability to use the premises where the

damage occurs.”). The restaurant remained open

every day, customers were always able to access the

restaurant, and suppliers were always able to access

the restaurant. See Def.’s Resp. 56.1, ¶ 26; Edmonson

Dep. (ECF No. 116-8), 39:12-19, 46:3-6, 53:1-9, 63:511. Thus, summary judgment is appropriate.

App.48a

IV. Conclusion

For the foregoing reasons, is hereby ORDERED

AND ADJUDGED that Defendant’s Daubert Motion

to Exclude Plaintiff’s Expert (ECF No 105) is

GRANTED as set forth above, Defendant’s Motion for

Summary Judgment (ECF No.106) is GRANTED as

set forth above. All other pending motions are denied

as MOOT.

DONE AND ORDERED in Chambers at Miami,

Florida, this 11th day of June, 2018.

/s/ K. Michael Moore

Chief United States District Judge

cc: All counsel of record

App.49a

SPARTA INSURANCE POLICY—

RELEVANT EXCERPTS

App.50a

COMMON POLICY DECLARATIONS

SPARTA INSURANCE COMPANY

Cityplace II, 185 Asylum Street, Hartford, CT 05103

________________________

Item 1.

Named Insured and Mailing Address

Mama Jo’s Inc. DBA: Berries

2884 SW 27 Ave

Miami FL 33133

Agent Name and Address

PROHOST USA, INC.

4500 Park Glen Road

Suite 410

Minneapolis MN 55416

Agent No.

00029

Item 2.

Policy Period

From: 09-19-2013 To: 09-19-2014

at 12:01 A.M., Standard time at your mailing

address shown above.

Item 3.

Business Description: RESTAURANT

Form of Business: CORPORATION

App.51a

Item 4.

In return for the payment of the premium, and

subject to all the terms of this policy, we agree with

you to provide the insurance as stated in this policy.

This policy consists of the following coverage

parts for which a premium is indicated. Where no

premium is shown, there is no coverage. This

premium may be subject to adjustment.

Coverage Part(s)

Premium

Commercial Property Coverage Part

$ 6,195.00

Commercial General Liability

Coverage Part

$ 12,878.00

Commercial Crime Coverage Part

Not Covered

Commercial Inland Marine

Coverage Part

Not Covered

Commercial Auto (Business or Truckers) Not Covered

Coverage Part

Commercial Garage Coverage Part

Not Covered

TAX OR SURCHARGE

$ 448.87

Total Policy Premium

$ 19,521.87

Item 5.

Forms and Endorsements

See Schedule of Forms and Endorsements

App.52a

SCHEDULE OF FORMS AND ENDORSEMENTS

SPARTA INSURANCE COMPANY

[Policy Number 053CP00228]

________________________

Named Insured: Mama Jo’s Inc. DBA: Berries

Effective Date: 09-19-13

12:01 A.M, Standard Time

Agent Name: PROHOST USA, INC.

Agent No.: 00029

Common Policy Forms and Endorsements

SPPJ 03

03-13

Policy Jacket

CO-DEC

01-97

Common Policy Declarations

FORMSCHED

01-97

Schedule Of Forms

Endorsements

LOCSCHED

01-97

Schedule Of Locations

IL 00 17

11-98

Common Policy Conditions

IL 00 21

09-08

Nuclear Energy

Exclusion Endt

IL 04 15

04-98

Protective Safeguards

IL 09 35

07-02

Excl of Certain

Computer-Related Losses

IL 09 53

01-08

Excl/Cert Acts-Terror;

Cov/Fire Losses

TAX-FORM

01-97

Schedule

Of

And

Liability

Taxes,

App.53a

Surcharges Or Fees

IL 01 12

06-10

Fl

Chgs-Mediation/Apprl

(Cmml Res Prop)

IL 01 75

09-07

Florida

Changes

Action Against Us

IL 02 55

02-12

Florida Changes-Canc

Nonrenewal

IL 04 01

02-12

Florida-Sinkhole Loss

Coverage

Legal

&

Property Forms and Endorsements

PF-DEC

10-00

Comm Property Cov Part

Supp Dec

PF-SCHED

10-00

Comm Property Cov Part Ext

Of Supp Dec

CP 00 10

06-07

Building & Personal Property Coverage

CP 00 30

06-07

Business Income Coverage

(&/Ex Exp)

CP 00 90

07-88

Commercial Property Conditions

CP 01 40

07-06

Excl of loss due to virus or

bacteria

CP 04 17

06-07

Utility Services-Direct Damage

CP 04 40

06-07

Spoilage Coverage

CP 10 30

06-07

Causes Of Loss-Special Form

CP 10 32

08-08

Water

ment

Exclusion

Endorse-

App.54a

CP 10 54

06-07

Windstorm Or Hail Exclusion

CP 12 18

06-07

Loss Payable Provisions

CP 15 45

06-07

Utility Services-Time Element

CP 55 04

12-08

Sparta Property Enhancement Endorsement

CP 55 21

03-11

Business Income ChangesTime Period

CP 75 00

06-08

Equipment Breakdown

Coverage

CP 75 DS

05-08

Equipment Breakdown

Coverage Schedule

MAN-PF

01-02

Sewer Or Drain Backup

MAN-PF

01-02

Windstorm Exclusion For

Spoilage

CP 01 25

02-12

Florida Changes

General Liability Forms And Endorsements

GL-DEC

12-01

Comm General Liability

Coverage Supp Dec

GL- SCHED

01-97

Comm General Liability

Coverage Schedule

LIQ-DEC

08-01

Liquor Liability Coverage

Part Dec

CG 00 01

04-13

Commercial General Liability Cov Form

CG 00 33

04-13

Liquor Liability Cov Form

(Occurrence)

CG 21 35

10-01

Excl-Cov C-Medical Payments

App.55a

CG 21 46

07-98

Abuse Or Molestation

Exclusion

CG 21 47

12-07

Employment-Related

Practices Exclusion

CG 21 49

09-99

Total Pollution Excl Endt

CG 21 67

12-04

Fungi Or Bacteria Exclusion

CG 21 75

06-08

Excl Certif Acts Of Terr &

Othr Act O/S

CG 21 96

03-05

Silica Or Silica- Related Dust

Exclusion

CG 02 20

03 - 12

Fl Changes - Cancellation &

Nonrenewal

CG L4 07

01-96

Prod/ Completed Operations

Hazard Redefin

GL 45 01

02-08

Asbestos Exclusion

GL 45 02

02-08

Lead Exclusion

GL 45 05

02-08

Prior

And/Or

Litigation Excl.

GL 55 01

02-08

Amended Additional Insured

Pending

App.56a

SCHEDULE OF LOCATIONS

SPARTA INSURANCE COMPANY

[Policy Number 053CP00228]

________________________

Named Insured: Mama Jo’s Inc. DBA: Berries

Effective Date: 09-19-13

12:01 A.M, Standard Time

Agent Name: PROHOST USA, INC.

Agent No.: 00029

Loc No.

001

Bldg No.

001

Designated Locations

2884 SW 27th Ave, Berries,

(Address, City, State, Miami, FL 33133

Zip Code)

Occupancy

Restaurant

Loc No.

001

Bldg No.

002

Designated Locations

2721 Coconut Ave, Berries,

(Address, City, State, Miami, FL 33133

Zip Code)

Occupancy

Storage

App.57a

COMMON POLICY CONDITIONS

All Coverage Parts included in this policy are

subject to the following conditions.

A.

Cancellation

1. The first Named Insured shown in the Declarations may cancel this policy by mailing or delivering

to us advance written notice of cancellation.

2. We may cancel this policy by mailing or

delivering to the first Named Insured written notice

of cancellation at least:

a.

10 days before the effective date of cancellation if we cancel for nonpayment of premium;

or

b.

30 days before the effective date of cancellation if we cancel for any other reason.

3. We will mail or deliver our notice to the first

Named Insured’s last mailing address known to us.

4. Notice of cancellation will state the effective

date of cancellation. The policy period will end on

that date.

5. If this policy is cancelled, we will send the

first Named Insured any premium refund due. If we

cancel, the refund will be pro rata. If the first Named

Insured cancels, the refund may he less than pro

rata. The cancellation will be effective even if we

have not made or offered a refund.

6. If notice is mailed, proof of mailing will be

sufficient proof of notice.

App.58a

B.

Changes

This policy contains all the agreements between

you and us concerning the insurance afforded. The

first Named Insured shown in the Declarations is

authorized to make changes in the terms of this

policy with our consent. This policy’s terms can be

amended or waived only by endorsement issued by

us and made a part of this policy.

C.

Examination of Your Books and Records

We may examine and audit your books and records

as they relate to this policy at any time during the

policy period and up to three years afterward.

D.

Inspections and Surveys

1. We have the right to:

a.

Make inspections and surveys at any time;

b.

Give you reports on the conditions we find;

and

c.

Recommend changes.

2. We are not obligated to make any inspections,

surveys, reports or recommendations and any such

actions we do undertake relate only to insurability

and the premiums to be charged. We do not make

safety inspections. We do not undertake to perform

the duty of any person or organization to provide for

the health or safety of workers or the public. And we

do not warrant that conditions:

a.

Are safe or healthful; or

b.

Comply with laws, regulations, codes or

standards.

App.59a

3. Paragraphs 1. and 2. of this condition apply

not only to us, but also to any rating, advisory, rate

service or similar organization which makes insurance inspections, surveys, reports or recommendations.

4. Paragraph 2. of this condition does not apply

to any inspections, surveys, reports or recommendations we may make relative to certification, under

state or municipal statutes, ordinances or regulations,

of boilers, pressure vessels or elevators.

E.

Premiums

The first Named Insured shown in the Declarations:

F.

1.

Is responsible for the payment of all

premiums; and

2.

Will be the payee for any return premiums

we pay.

Transfer of Your Rights and Duties Under This

Policy

Your rights and duties under this policy may not

be transferred without our written consent except in

the case of death of an individual named insured.

If you die, your rights and duties will be

transferred to your legal representative but only

while acting within the scope of duties as your legal

representative. Until your legal representative is

appointed, anyone having proper temporary custody

of your property will have your rights and duties but

only with respect to that property.

App.60a

NOTICE TO POLICYHOLDERS

RISK MANAGEMENT PLAN FLORIDA

In accordance with Florida statute, section

627.0625(3), for insurance carriers who offer commercial casualty or commercial property insurance, we

are advising you of your right under this section to

obtain guidelines for risk management plans. Per

Florida statute, this request must be made in writing

to SPARTA Insurance Company.

These guidelines cover safety measures in a

number of areas including:

 Pollution and environmental hazards

 Disease hazards

 Accidental occurrences

 Fire hazards

 Fire prevention and detection

 Liability for acts from the course of business

 Slip and fall hazards

 Product injury

 Hazards unique to a particular class or category of policyholders

Requests in writing can be mailed to:

Loss Control Department

SPARTA Insurance Company

CityPlace II

185 Asylum Street

Hartford, CT 06103

App.61a

COMMERCIAL PROPERTY COVERAGE PART

SUPPLEMENTAL DECLARATIONS

SPARTA INSURANCE COMPANY

[Policy Number 053CP00228]

________________________

Named Insured: Mama Jo’s Inc. DBA: Berries

Effective Date: 09-19-13

12:01 A.M, Standard Time

Agent Name: PROHOST USA, INC.

Agent No.: 00029

Item 1. Business Description: Restaurant

Item 2. Premises Described:

See Schedule of Locations

Item 3. $500 Deductible unless otherwise indicated.

Item 4. Coverage Provided

Loc No.

001

Bldg No.

001

Coverage

Building Joisted Masonry

Limit of Insurance

$500,000

Covered Causes of Loss

Special

Coins.

80

Other Provision

 Replacement Cost

Deductible: 2,500

Exceptions: Wind

App.62a

Loc No.

001

Bldg No.

001

Coverage

Business Pers Pro Joisted Masonry

Limit of Insurance

$300,000

Covered Causes of Loss Special

Coins.

80

Other Provision

 Replacement Cost

Deductible: 2,500

Exceptions: Wind

Loc No.

001

Bldg No.

001

Coverage

Business Income Joisted Masonry

Limit of Insurance

$500,000

Covered Causes of Loss

Special

Other Provision



Business Income Indemnity: Monthly Limit:

1/6

Extended 60 Days

Exceptions: Wind

Item 5. Forms and Endorsemenls

Form(s) and Endorsement(s) made a part of this

policy at time of issue:

See Schedule of Forms and Endorsements

App.63a

COMMERCIAL PROPERTY COVERAGE PART

EXTENSION OF SUPPLEMENTAL

DECLARATIONS

SPARTA INSURANCE COMPANY

[Policy Number 053CP00228]

________________________

Named Insured: Mama Jo’s Inc. DBA: Berries

Effective Date: 09-19-13

12:01 A.M, Standard Time

Agent Name: PROHOST USA, INC.

Agent No.: 00029

Item 4. Coverage Provided

Loc No.

001

Bldg No.

001

Coverage

Spoilage

Limit of Insurance

$25,000

Covered Causes of Loss

Coins.

Other Provision

 Replacement Cost

Deductible: $500

Type: Brkdwn Cont/Pwr Outage

App.64a

Loc No.

001

Bldg No.

002

Coverage

Business Pers Pro Joisted Masonry

Limit of Insurance

$50,000

Covered Causes of Loss

Special

Coins.

80

Other Provision

 Replacement Cost

Deductible: 2,500

Exceptions: Wind

App.65a

BUILDING AND PERSONAL PROPERTY

COVERAGE FORM

COMMERCIAL PROPERTY

CP 00 10 06 07

Various provisions in this policy restrict coverage. Read the entire policy carefully to determine

rights, duties and what is and is not covered.

Throughout this policy the words ‘you” and

‘your” refer to the Named Insured shown in the

Declarations. The words “we”, “us” and “our” refer to

the Company providing this insurance.

Other words and phrases that appear in

quotation marks have special meaning. Refer to

Section H., Definitions.

A.

Coverage

We will pay for direct physical loss of or damage

to Covered Property at the premises described in the

Declarations caused by or resulting from any

Covered Cause of Loss.

1. Covered Properly

Covered Property, as used in this Coverage Part,

means the type of property described in this section,

A.1., and limited in A.2., Property Not Covered, if a

Limit of Insurance is shown in the Declarations for

that type of property.

a.

Building, meaning the building or structure

described in the Declarations, including:

(1) Completed additions;

(2) Fixtures, including outdoor fixtures;

App.66a

(3) Permanently installed:

(a) Machinery and

(b) Equipment;

(4) Personal property owned by you that is

used to maintain or service the

building or structure or its premises,

including:

(a) Fire-extinguishing equipment;

(b) Outdoor furniture;

(c)

Floor coverings; and

(d) Appliances used for refrigerating,

ventilating, cooking, dishwashing

or laundering;

(5) If not covered by other insurance:

(a) Additions

under

construction,

alterations and repairs to the

building or structure;

(b) Materials, equipment, supplies

and temporary structures, on or

within 100 feet of the described

premises, used for making additions, alterations or repairs to the

building or structure.

b.

Your Business Personal Property located in

or on the building described in the

Declarations or in the open (or in a vehicle)

within 100 feet of the described premises,

consisting of the following unless otherwise

specified in the Declarations or on the Your

App.67a

Business Personal Property—Separation Of

Coverage form:

(1) Furniture and fixtures;

(2) Machinery and equipment;

(3) “Stock”;

(4) All other personal property owned by

you and used in your business;

(5) Labor, materials or services furnished

or arranged by you on personal

property of others;

(6) Your use interest as tenant in improvements and betterments. Improvements

and betterments are fixtures, alterations, installations or additions:

(a) Made a part of the building or

structure you occupy but do not

own; and

(b) You acquired or made at your

expense but cannot legally remove;

(7) Leased personal property for which you

have a contractual responsibility to

insure, unless otherwise provided for

under Personal Property of Others.

c. Personal Property of Others that is:

(1) In your care, custody or control; and

(2) Located in or on the building described in

the Declarations or in the open (or in a

vehicle) within 100 feet of the described

premises,

App.68a

However, our payment for loss of or damage to

personal property of others will only be for the

account of the owner of the property.

2. Property Not Covered

Covered Property does not include:

a.

Accounts, bills, currency, food stamps or

other evidences of debt, money, notes or

securities. Lottery tickets held for sale are

not securities;

b.

Animals, unless owned by others and

boarded by you, or if owned by you, only as

“stock” while inside of buildings;

c.

Automobiles held for sale;

d.

Bridges, roadways, walks, patios or other

paved surfaces;

e.

Contraband, or property in the course of

illegal transportation or trade;

f.

The cost of excavations, grading, backfilling

or filling;

g.

Foundations of buildings, structures,

machinery or boilers if their foundations are

below:

(1) lowest basement floor; or

(2) The surface of the ground, if there is no

basement;

h.

Land (including land on which the property

is located), water, growing crops or lawns;

i.

Personal property while airborne or waterborne;

App.69a

j.

Bulkheads, pilings, piers, wharves or docks;

k.

Property that is covered under another

coverage form of this or any other policy in

which it is more specifically described,

except for the excess of the amount due

(whether you can collect on it or not) from

that other insurance;

l.

Retaining walls that are not part of a

building;

m. Underground pipes, flues or drains;

n.

Electronic data, except as provided under

the Additional Coverage, Electronic Data.

Electronic data means information, facts or

computer programs stored as or on, created

or used on, or transmitted to or from

computer software (including systems and

applications software), on hard or floppy

disks, CD-ROMs, tapes, drives, cells, data

processing devices or any other repositories

of computer software which are used with

electronically controlled equipment. The

term computer programs, referred to in the

foregoing description of electronic data,

means a set of related electronic instructions

which direct the operations and functions of a

computer or device connected to it, which

enable the computer or device to receive,

process, store, retrieve or send data. This

paragraph, n., does not apply to your “stock”

of prepackaged software;

o.

The cost to replace or restore the information on valuable papers and records, including

those which exist as electronic data. Valuable

App.70a

papers and records include but are not

limited to proprietary information, books of

account, deeds, manuscripts, abstracts, drawings and card index systems. Refer to the

Coverage Extension for Valuable Papers

And Records (Other Than Electronic Data)

for limited coverage for valuable papers and

records other than those which exist as

electronic data;

p.

Vehicles or self-propelled machines (including aircraft or watercraft) that:

(1) Are licensed for use on public roads; or

(2) Are operated principally away from the

described premises.

This paragraph does not apply to:

(a) Vehicles or self-propelled machines or

autos you manufacture, process or

warehouse;

(b) Vehicles or self-propelled machines,

other than autos, you hold for sale;

(c) Rowboats or canoes out of water at the

described premises; or

(d) Trailers, but only to the extent provided for in the Coverage Extension for

Non-owned Detached Trailers;

q.

The following property while outside of

buildings:

(1) Grain, hay, straw or other crops;

(2) Fences, radio or television antennas

(including satellite dishes) and their

App.71a

lead-in wiring, masts or towers, trees,

shrubs or plants (other than 'stock" of

trees, shrubs or plants), all except as

provided in the Coverage Extensions.

3. Covered Causes of Loss

See applicable Causes of Loss Form as shown in

the Declarations.

4. Additional Coverages

a.

Debits Removal

(1) Subject to Paragraphs (3) and (4), we will

pay your expense to remove debris of

Covered Property caused by or resulting

from a Covered Cause of Loss that occurs

during the policy period. The expenses will

be paid only if they are reported to us in

writing within 180 days of the date of direct

physical loss or damage.

(2) Debris Removal does not apply to costs to:

(a) Extract 'pollutants" from land or water;

or

(b) Remove, restore or replace polluted land

or water.

(3) Subject to the exceptions in Paragraph (4),

the following provisions apply:

(a) The most we will pay for the total of

direct physical loss or damage plus

debris removal expense is the Limit of

Insurance applicable to the Covered

Property that has sustained loss or

damage.

App.72a

(b) Subject to (a) above, the amount we

will pay for debris removal expense is

limited to 25% of the sum of the

deductible plus the amount that we pay

for direct physical loss or damage to the

Covered Property that has sustained

loss or damage.

(4) We will pay up to an additional $10,000 for

debris removal expense, for each location, in

any one occurrence of physical loss or

damage to Covered Property, if one or both

of the following circumstances apply:

(a) The total of the actual debris removal

expense plus the amount we pay for

direct physical loss or damage exceeds

the Limit of Insurance on the Covered

Property that has sustained loss or

damage.

(b) The actual debris removal expense

exceeds 25% of the sum of the

deductible plus the amount that we pay

for direct physical loss or damage to the

Covered Property that has sustained

loss or damage.

Therefore, if (4)(a) and/or (4)(b) apply, our total

payment for direct physical loss or damage and

debris removal expense may reach but will never

exceed the Limit of Insurance on the Covered

Property that has sustained loss or damage, plus

$10,000.

App.73a

(5) Examples

The following examples assume that there is no

Coinsurance penalty.

Limit of Insurance:

$90,000

Amount of Deductible:

$500

Amount of Loss:

$50,000

Amount of Loss Payable:

$49,500

($50,000 -$500)

Debris Removal Expense:

$ 10,000

Debris Removal Expense Payable:

$ 10,000

($10,000is 20% of $50,000.)

The debris removal expense is less than 25% of

the sum of the loss payable plus the deductible. The

sum of the loss payable and the debris removal

expense ($49,500 $10,000 = $59,500) is less than the

Limit of Insurance. Therefore the full amount of

debris removal expense is payable in accordance with

the terms of Paragraph (3).

Example #2

Limit of Insurance:

$90,000

Amount of Deductible:

$500

Amount of Loss:

$80,000

Amount of Loss Payable:

$79,500

($80,000-$500)

Debris Removal Expense:

$30,000

App.74a

Debris Removal Expense Payable

Basic Amount:

$10,500

Additional Amount:

$10,000

The basic amount payable for debris removal

expense under the terms of Paragraph (3) is

calculated as follows: $80,000 ($79,500 + $500) x .25

= $20,000; capped at $10,500. The cap applies

because the sum of the loss payable ($79,500) and

the basic amount payable for debris removal expense

($10,500) cannot exceed the Limit of Insurance

($90,000).

The additional amount payable for debris

removal expense is provided in accordance with the

terms of Paragraph (4), because the debris removal

expense ($30,000) exceeds 25% of the loss payable

plus the deductible ($30,000 is 37.5% of $80,000),

and because the sum of the loss payable and debris

removal expense ($79,500 + $30,000 = $109,500)

would exceed the Limit of Insurance ($90,000). The

additional amount of covered debris removal expense

is $10,000, the maximum payable under Paragraph

(4). Thus the total payable for debris removal

expense in this example is $20,500; $9,500 of the

debris removal expense is not covered.

b.

Preservation of Property

If it is necessary to move Covered Property from

the described premises to preserve it from loss or

damage by a Covered Cause of Loss, we will pay for

any direct physical loss or damage to that property:

(1) While it is being moved or while

temporarily stored at another location; and

App.75a

(2) Only if the loss or damage occurs within 30

days after the property is first moved.

c.

Fire Department Service Charge

When the fire department is called to save or

protect Covered Property from a Covered Cause of

Loss, we will pay up to $1,000, unless a higher limit

is shown in the Declarations, for your liability for fire

department service charges:

(1) Assumed by contract or agreement prior to

loss; or

(2) Required by local ordinance.

No Deductible

Coverage.

d.

applies

to

this

Additional

Pollutant Clean-up and Removal

We will pay your expense to extract “pollutants”

from land or water at the described premises if the

discharge, dispersal, seepage, migration, release or

escape of the “pollutants” is caused by or results from

a Covered Cause of Loss that occurs during the

policy period. The expenses will be paid only if they

are reported to us in writing within 180 days of the

date on which the Covered Cause of Loss occurs.

This Additional Coverage does not apply to costs

to test for, monitor or assess the existence,

concentration or effects of “pollutants”. But we will

pay for testing which is performed in the course of

extracting the “pollutants” from the land or water.

The most we will pay under this Additional

Coverage for each described premises is $10,000 for

the sum of all covered expenses arising out of

App.76a

Covered Causes of Loss occurring during each

separate 12-month period of this policy.

e.

Increased Cost of Construction

(1) This Additional Coverage applies only to

buildings to which the Replacement Cost Optional

Coverage applies.

(2) In the event of damage by a Covered Cause of

Loss to a building that is Covered Property, we will

pay the increased costs incurred to comply with

enforcement of an ordinance or law in the course of

repair, rebuilding or replacement of damaged parts

of that property, subject to the limitations stated in

e.(3) through e.{9) of this Additional Coverage.

(3) The ordinance or law referred to in e.(2) of

this Additional Coverage is an ordinance or law that

regulates the construction or repair of buildings or

establishes zoning or land use requirements at the

described premises, and is in force at the time of loss.

(4) Under this Additional Coverage, we will not

pay any costs due to an ordinance or law that:

(a) You were required to comply with before

the loss, even when the building was

undamaged; and

(b) You failed to comply with.

(5) Under this Additional Coverage, we will not

pay for:

(a) The enforcement of any ordinance or law

which requires demolition, repair, replacement, reconstruction, remodeling or remediation of property due to contamination by

“pollutants” or due to the presence, growth,

App.77a

proliferation, spread or any activity of

“fungus”, wet or dry rot or bacteria; or

(b) Any costs associated with the enforcement

of an ordinance or law which requires any

insured or others to test for, monitor, clean

up, remove, contain, treat, detoxify or

neutralize, or in any way respond to, or

assess the effects of “pollutants”, “fungus”,

wet or dry rot or bacteria.

(6) The most we will pay under this Additional

Coverage, for each described building insured under

this Coverage Form, is $10,000 or 5% of the Limit of

Insurance applicable to that building, whichever is

less. If a damaged building is covered under a

blanket Limit of Insurance which applies to more

than one building or item of property, then the most

we will pay under this Additional Coverage, for that

damaged building, is the lesser of: $10,000 or 5%

times the value of the damaged building as of the

time of loss times the applicable Coinsurance

percentage.

The amount payable under this Additional

Coverage is additional insurance.

(7) With respect to this Additional Coverage:

(a) We will not pay for the Increased Cost of

Construction:

(i)

Until the property is actually repaired

or replaced, at the same or another

premises; and

(ii) Unless the repairs or replacement are

made as soon as reasonably possible

after the loss or damage, not to exceed

App.78a

two years. We may extend this period

in writing during the two years.

(b) If the building is repaired or replaced at the

same premises, or if you elect to rebuild at

another premises, the most we will pay for

the Increased Cost of Construction, subject

to the provisions of e.(6) of this Additional

Coverage, is the increased cost of construction at the same premises.

(c) If the ordinance or law requires relocation

to another premises, the most we will pay

for the Increased Cost of Construction,

subject to the provisions of e.(6) of this

Additional Coverage, is the increased cost of

construction at the new premises.

(8) This Additional Coverage is not subject to the

terms of the Ordinance Or Law Exclusion, to the

extent that such Exclusion would conflict with the

provisions of this Additional Coverage.

(9) The costs addressed in the Loss Payment and

Valuation Conditions, and the Replacement Cost

Optional Coverage, in this Coverage Form, do not

include the increased cost attributable to enforcement of an ordinance or law. The amount payable

under this Additional Coverage, as stated in e.(6) of

this Additional Coverage, is not subject to such

limitation.

f.

Electronic Data

(1) Under this Additional Coverage, electronic

data has the meaning described under Property Not

Covered, Electronic Data.

App.79a

(2) Subject to the provisions of this Additional

Coverage, we will pay for the cost to replace or

restore electronic data which has been destroyed or

corrupted by a Covered Cause of Loss. To the extent

that electronic data is not replaced or restored, the

loss will be valued at the cost of replacement of the

media on which the electronic data was stored, with

blank media of substantially identical type.

(3) The Covered Causes of Loss applicable to

Your Business Personal Property apply to this

Additional Coverage, Electronic Data, subject to the

following:

(a) If the Causes of Loss—Special Form applies,

coverage under this Additional Coverage,

Electronic Data, is limited to the “specified

causes of loss” as defined in that form, and

Collapse as set forth in that form.

(b) If the Causes of Loss—Broad Form applies,

coverage under this Additional Coverage,

Electronic Data, includes Collapse as set

forth in that form.

(c) If the Causes of Loss Form is endorsed to

add a Covered Cause of Loss, the additional

Covered Cause of Loss does not apply to the

coverage provided under this Additional

Coverage, Electronic Data.

(d) The Covered Causes of Loss include a virus,

harmful code or similar instruction

introduced into or enacted on a computer

system (including electronic data) or a

network to which it is connected, designed

to damage or destroy any part of the system

or disrupt its normal operation. But there is

App.80a

no coverage for loss or damage caused by or

resulting from manipulation of a computer

system (including electronic data) by any

employee, including a temporary or leased

employee, or by an entity retained by you or

for you to inspect, design, install, modify,

maintain, repair or replace that system.

(4) The most we will pay under this Additional

Coverage, Electronic Data, is $2,500 for all loss or

damage sustained in any one policy year, regardless

of the number of occurrences of loss or damage or the

number of premises, locations or computer systems

involved. If loss payment on the first occurrence does

not exhaust this amount, then the balance is

available for subsequent loss or damage sustained in

but not after that policy year. Wth respect to an

occurrence which begins in one policy year and

continues or results in additional loss or damage in a

subsequent policy year(s), all loss or damage is

deemed to be sustained in the policy year in which

the occurrence began.

5. Coverage Extensions

Except as otherwise provided, the following

Extensions apply to property located in or on the

building described in the Declarations or in the open

(or in a vehicle) within 100 feet of the described

premises.

If a Coinsurance percentage of 80% or more, or a

Value Reporting period symbol, is shown in the

Declarations, you may extend the insurance provided

by this Coverage Part as follows:

App.81a

a. Newly Acquired or Constructed Property

(1) Buildings

If this policy covers Building, you may

extend that insurance to apply to:

(a) Your new buildings while being built

on the described premises; and

(b) Buildings you acquire at locations,

other than the described premises,

intended for:

(i)

Similar use as the building

described in the Declarations; or

(ii) Use as a warehouse.

The most we will pay for loss or damage under

this Extension is $250,000 at each building.

(2) Your Business Personal Property

(a) If this policy covers Your Business Personal

Property, you may extend that insurance to

apply to:

(i)

Business personal property, including

such property that you newly acquire,

at any location you acquire other than

at fairs, trade shows or exhibitions;

(ii) Business personal property, including

such property that you newly acquire,

located at your newly constructed or

acquired buildings at the location

described in the Declarations; or

(iii) Business personal property that you

newly acquire, located at the described

premises.

App.82a

The most we will pay for loss or damage under

this Extension is $100,000 at each building

(b) This Extension does not apply to:

(i)

Personal property of others that is

temporarily in your possession in the

course of installing or performing work

on such property; or

(ii) Personal property of others that is

temporarily in your possession in the

course of your manufacturing or

wholesaling activities.

(3) Period Of Coverage

With respect to insurance on or at each newly

acquired or constructed property, coverage will end

when any of the following first occurs:

(a) This policy expires;

(b) 30 days expire after you acquire the

property or begin construction of that part

of the building that would qualify as

covered property; or

(c) You report values to us.

We will charge you additional premium for

values reported from the date you acquire the

property or begin construction of that part of the

building that would qualify as covered property.

b. Personal Effects and Property of Others

You may extend the insurance that applies to

Your Business Personal Property to apply to:

App.83a

(1) Personal effects owned by you, your officers,

your partners or members, your managers

or your employees. This Extension does not

apply to loss or damage by theft.

(2) Personal property of others in your care,

custody or control.

The most we will pay for loss or damage under

this Extension is $2,500 at each described premises.

Our payment for loss of or damage to personal

property of others will only be for the account of the

owner of the property.

c. Valuable Papers and Records (Other Than

Electronic Data)

(1) You may extend the insurance that applies to

Your Business Personal Property to apply to the cost

to replace or restore the lost information on valuable

papers and records for which duplicates do not exist.

But this Extension does not apply to valuable papers

and records which exist as electronic data. Electronic

data has the meaning described under Property Not

Covered, Electronic Data.

(2) If the Causes Of Loss—Special Form applies,

coverage under this Extension is limited to the

“specified causes of loss” as defined in that form, and

Collapse as set forth in that form.

(3) If the Causes Of Loss—Broad Form applies,

coverage under this Extension includes Collapse as

set forth in that form.

(4) Under this Extension, the most we will pay to

replace or restore the lost information is $2,500 at

each described premises, unless a higher limit is

App.84a

shown in the Declarations. Such amount is

additional insurance. We will also pay for the cost of

blank material for reproducing the records (whether

or not duplicates exist), and (when there is a

duplicate) for the cost of labor to transcribe or copy

the records. The costs of blank material and labor

are subject to the applicable Limit of Insurance on

Your Business Personal Property and therefore

coverage of such costs is not additional insurance.

d. Property Off-premises

(1) You may extend the insurance provided by

this Coverage Form to apply to your Covered

Property while it is away from the described

premises, if it is:

(a) Temporarily at a location you do not own,

lease or operate;

(b) In storage at a location you lease, provided

the lease was executed after the beginning

of the current policy term; or

(c) At any fair, trade show or exhibition.

(2) This Extension does not apply to property:

(a) In or on a vehicle; or

(b) In the care, custody or control of your

salespersons, unless the property is in such

care, custody or control at a fair, trade show

or exhibition.

(3) The most we will pay for loss or damage

under this Extension is $10,000.

App.85a

e. Outdoor Property

You may extend the insurance provided by this

Coverage Form to apply to your outdoor fences, radio

and television antennas (including satellite dishes),

trees, shrubs and plants (other than “stock” of trees,

shrubs or plants), including debris removal expense,

caused by or resulting from any of the following

causes of loss if they are Covered Causes of Loss:

(1) Fire;

(2) Lightning;

(3) Explosion;

(4) Riot or Civil Commotion; or

(5) Aircraft.

The most we will pay for loss or damage under

this Extension is $1,000, but not more than $250 for

any one tree, shrub or plant. These limits apply to

any one occurrence, regardless of the types or

number of items lost or damaged in that occurrence.

f. Non-owned Detached Trailers

(1) You may extend the insurance that applies to

Your Business Personal Property to apply to loss or

damage to trailers that you do not own, provided

that:

(a) The trailer is used in your business;

(b) The trailer is in your care, custody or

control at the premises described in the

Declarations; and

(c) You have a contractual responsibility to pay

for loss or damage to the trailer.

App.86a

(2) We will not pay for any loss or damage that

occurs:

(a) While the trailer is attached to any motor

vehicle or motorized conveyance, whether or

not the motor vehicle or motorized

conveyance is in motion;

(b) During hitching or unhitching operations,

or when a trailer becomes accidentally

unhitched from a motor vehicle or

motorized conveyance.

(3) The most we will pay for loss or damage

under this Extension is $5,000, unless a higher limit

is shown in the Declarations.

(4) This insurance is excess over the amount due

(whether you can collect on it or not) from any other

insurance covering such property.

Each of these Extensions is additional insurance

unless otherwise indicated. The Additional Condition, Coinsurance, does not apply to these Extensions.

B.

Exclusions and Limitations

See applicable Causes Of Loss Form as shown in

the Declarations.

C.

Units of Insurance

The most we will pay for loss or damage in any

one occurrence is the applicable Unit of Insurance

shown in the Declarations.

The most we will pay for loss or damage to

outdoor signs, whether or not the sign is attached to

a building, is $2,500 per sign in any one occurrence.

App.87a

The amounts of insurance stated in the

following Additional Coverages apply in accordance

with the terms of such coverages and are separate

from the Limit(s) of Insurance shown in the Declarations for any other coverage:

1.

Fire Department Service Charge;

2.

Pollutant Clean-up And Removal;

3.

Increased Cost Of Construction; and

4.

Electronic Data.

Payments under the Preservation Of Property

Additional Coverage will not increase the applicable

Limit of Insurance.

D.

Deductible

In any one occurrence of loss or damage

(hereinafter referred to as loss), we will first reduce

the amount of loss if required by the Coinsurance

Condition or the Agreed Value Optional Coverage. If

the adjusted amount of loss is less than or equal to

the Deductible, we will not pay for that loss. If the

adjusted amount of loss exceeds the Deductible, we

will then subtract the Deductible from the adjusted

amount of loss, and will pay the resulting amount or

the Limit of Insurance, whichever is less.

When the occurrence involves loss to more than

one item of Covered Property and separate Limits of

Insurance apply, the losses will not be combined in

determining application of the Deductible. But the

Deductible will be applied only once per occurrence.

App.88a

Example #1

(This example assumes there is no Coinsurance

penalty.)

Deductible:

$250

Limit of Insurance—Building #1: $60,000

Limit of Insurance—Building #2: $80,000

Loss to Building #1:

$60,100

Loss to Building #2:

$90,000

The amount of loss to Building #1 ($60,100) is

less than the sum ($60,250) of the Limit of Insurance

applicable to Building #1 plus the Deductible.

The Deductible will be subtracted from the

amount of loss in calculating the loss payable for

Building #1:

$60,100

— 250

____________

$ 59,850 Loss Payable -Building #1

The Deductible applies once per occurrence and

therefore is not subtracted in determining the

amount of loss payable for Building #2. Loss payable

for Building #2 is the Limit of Insurance of $80,000.

Total amount of loss payable:

$59,850 + $80,000 = $139,850

Example #2

(This example, too,

Coinsurance penalty.)

assumes

there

is

no

App.89a

The Deductible and Limits of Insurance are the

same as those in Example #1.

Loss to Building #1: $70,000

(Exceeds Limit of Insurance plus Deductible)

Loss to Building #2: $90,00

(Exceeds Limit of Insurance plus Deductible)

Loss Payable—Building #1: $ 60,000

(Limit of Insurance)

Loss Payable—Building #2: $80,000

(Limit of Insurance)

Total amount of loss payable: $ 140,000

E.

Loss Donations

The following conditions apply in addition to the

Common Policy Conditions and the Commercial

Property Conditions.

1. Abandonment

us.

There can be no abandonment of any property to

2. Appraisal

If we and you disagree on the value of the

property or the amount of loss, either may make

written demand for an appraisal of the loss. In this

event, each party will select a competent and

impartial appraiser. The two appraisers will select

an umpire. If they cannot agree, either may request

that selection be made by a judge of a court having

jurisdiction. The appraisers will state separately the

value of the property and amount of loss. If they fail

to agree, they will submit their differences to the

App.90a

umpire. A decision agreed to by any two will be

binding. Each party will:

a.

Pay its chosen appraiser; and

b.

Bear the other expenses of the appraisal

and umpire equally.

If there is an appraisal, we will still retain our

right to deny the claim.

3. Duties In The Event Of Loss Or Damage

a.

You must see that the following are done in

the event of loss or damage to Covered

Property:

(1) Notify the police if a law may have

been broken.

(2) Give us prompt notice of the loss or

damage. Include a description of the

property involved.

(3) As soon as possible, give us a

description of how, when and where the

loss or damage occurred.

(4) Take all reasonable steps to protect the

Covered Property from further damage,

and keep a record of your expenses necessary to protect the Covered Property,

for consideration in the settlement of

the claim. This will not increase the

Limit of Insurance. However, we will

not pay for any subsequent loss or

damage resulting from a cause of loss

that is not a Covered Cause of Loss.

Also, if feasible, set the damaged

App.91a

property aside and in the best possible

order for examination.

(5) At our request, give us complete inventories of the damaged and undamaged

property. Include quantities, costs, values

and amount of loss claimed.

(6) As often as may be reasonably required,

permit us to inspect the property

proving the loss or damage and examine

your books and records.

Also permit us to take samples of

damaged and undamaged property for

inspection, testing and analysis, and

permit us to make copies from your

books and records.

(7) Send us a signed, sworn proof of loss

containing the information we request

to investigate the claim. You must do

this within 60 days after our request.

We will supply you with the necessary

forms.

(8) Cooperate with us in the investigation

or settlement of the claim.

b.

We may examine any insured under oath,

while not in the presence of any other insured

and at such times as may be reasonably

required, about any matter relating to this

insurance or the claim, including an insured’s

books and records. In the event of an examination, an insured’s answers must be signed.

App.92a

4. Loss Payment

a. In the event of loss or damage covered by this

Coverage Form, at our option, we will either:

(1) Pay the value of lost or damaged property;

(2) Pay the cost of repairing or replacing the

lost or damaged property, subject to b.

below;

(3) Take all or any part of the property at an

agreed or appraised value; or

(4) Repair, rebuild or replace the property with

other property of like kind and quality,

subject to b. below.

We will determine the value of lost or damaged

property, or the cost of its repair or replacement,

in accordance with the applicable terms of the

Valuation Condition in this Coverage Form or

any applicable provision which amends or

supersedes the Valuation Condition.

b. The cost to repair, rebuild or replace does not

include the increased cost attributable to enforcement

of any ordinance or law regulating the construction,

use or repair of any property.

c. We will give notice of our intentions within 30

days after we receive the sworn proof of loss.

d. We will not pay you more than your financial

interest in the Covered Property.

e. We may adjust losses with the owners of lost

or damaged property if other than you. If we pay the

owners, such payments will satisfy your claims

against us for the owners’ property. We will not pay

App.93a

the owners more than their financial interest in the

Covered Property.

f. We may elect to defend you against suits

arising from claims of owners of property. We will do

this at our expense.

g. We will pay for covered loss or damage within

30 days after we receive the sworn proof of loss, if

you have complied with all of the terms of this

Coverage Part and:

(1) We have reached agreement with you on

the amount of loss; or

(2) An appraisal award has been made.

h. A party wall is a wall that separates and is

common to adjoining buildings that are owned by

different parties. In settling covered losses involving

a party wall, we will pay a proportion of the loss to

the party wall based on your interest in the wall in

proportion to the interest of the owner of the

adjoining building. However, if you elect to repair or

replace your building and the owner of the adjoining

building elects not to repair or replace that building,

we will pay you the full value of the loss to the party

wall, subject to all applicable policy provisions

including Limits of Insurance, the Valuation and

Coinsurance Conditions and all other provisions of

this Loss Payment Condition. Our payment under

the provisions of this paragraph does not alter any

right of subrogation we may have against any entity,

including the owner or insurer of the adjoining

building, and does not alter the terms of the Transfer

Of Rights Of Recovery Against Others To Us

Condition in this policy.

App.94a

5. Recovered Property

If either you or we recover any property after

loss settlement, that party must give the other

prompt notice. At your option, the property will be

returned to you. You must then return to us the

amount we paid to you for the property. We will pay

recovery expenses and the expenses to repair the

recovered property, subject to the Limit of Insurance.

6. Vacancy

a. Description of Terms

(1) As used in this Vacancy Condition, the term

building and the term vacant have the

meanings set forth in (1)(a) and (1)(b)

below:

(a) When this policy is issued to a tenant,

and with respect to that tenant’s

interest in Covered Property, building

means the unit or suite rented or

leased to the tenant. Such building is

vacant when it does not contain enough

business personal property to conduct

customary operations.

(b) When this policy is issued to the owner

or general lessee of a building, building

means the entire building. Such

building is vacant unless at least 31%

of its total square footage is

(i)

Rented to a lessee or sub-lessee

and used by the lessee or sublessee

to conduct its customary operations; and/or

App.95a

(ii) Used by the building owner to

conduct customary operations.

(2) Buildings under construction or renova-tion

are not considered vacant.

b. Vacancy Provisions

If the building where loss or damage occurs has

been vacant for more than 60 consecutive days before

that loss or damage occurs:

(1) We will not pay for any loss or damage

caused by any of the following even if they

are Covered Causes of Loss:

(a) Vandalism;

(b) Sprinkler leakage, unless you have

protected the system against freezing;

(c) Building glass breakage;

(d) Water damage;

(e) Theft; or

(f)

Attempted theft.

(2) With respect to Covered Causes of Loss

other than those listed in b.(1)(a) through

b.(1)(f) above, we will reduce the amount we

would otherwise pay for the loss or damage

by 15%.

7. Valuation

We will determine the value of Covered Property

in the event of loss or damage as follows:

App.96a

a.

At actual cash value as of the time of loss or

damage, except as provided in b., c., d. and

e. below.

b.

If the Limit of Insurance for Building

satisfies the Additional Condition, Coinsurance, and the cost to repair or replace the

damaged building property is $2,500 or less,

we will pay the cost of building repairs or

replacement.

The cost of building repairs or replacement does

not include the increased cost attributable to

enforcement of any ordinance or law regulating the

construction, use or repair of any property.

However, the following property will be valued

at the actual cash value even when attached to the

building:

(1) Awnings or floor coverings;

(2) Appliances for refrigerating, ventilating, cooking, dishwashing or laundering;

or

(3) Outdoor equipment or furniture.

c.

“Stock” you have sold but not delivered at the

selling price less discounts and expenses

you otherwise would have had.

d.

Glass at the cost of replacement with safetyglazing material if required by law.

e.

Tenants’ Improvements and Betterments

at:

(1) Actual cash value of the lost or damaged

property if you make repairs promptly.

App.97a

(2) A proportion of your original cost if you

do not make repairs promptly. We will

determine the proportionate value as

follows:

(a) Multiply the original cost by the

number of days from the loss or

damage to the expiration of the

lease; and

(b) Divide the amount determined in

(a) above by the number of days

from the installation of improvements to the expiration of the lease.

If your lease contains a renewal option,

the expiration of the renewal option

period will replace the expiration of the

lease in this procedure.

(3) Nothing if others pay for repairs or

replacement.

F.

Additional Conditions

The following conditions apply in addition to the

Common Policy Conditions and the Commercial

Property Conditions.

1. Coinsurance

If a Coinsurance percentage is shown in the

Declarations, the following condition applies.

a.

We will not pay the full amount of any foss

if the value of Covered Property at the time

of loss times the Coinsurance percentage

shown for it in the Declarations is greater

App.98a

than the Limit of Insurance for the

property.

Instead, we will determine the most we will

pay using the following steps:

(1) Multiply the value of Covered Property

at the time of loss by the Coinsurance

percentage;

(2) Divide the Limit of Insurance of the

property by the figure determined in

Step (1);

(3) Multiply the total amount of loss,

before

the

application

of

any

deductible, by the figure determined in

Step (2); and

(4) Subtract the deductible from the figure

determined in Step (3).

We will pay the amount determined in Step (4)

or the limit of insurance, whichever is less. For the

remainder, you will either have to rely on other

insurance or absorb the loss yourself.

Example #1 (Underinsurance)

When:

The value of the property is:

$ 250,000

The Coinsurance percentage for it is: 80%

The Limit of Insurance for it is:

$ 100,000

The Deductible is:

$ 250

Step (1): $250,000 x 80% = $200,000

(the minimum amount of insurance to meet your

Coinsurance requirements)

App.99a

Step (2): $100,000 + $200,000 = .50

Step (3): $40,000 x .50 = $20,000

Step (4): $20,000 -$250 = $19,750

We will pay no more than $19,750. The

remaining $20,250 is not covered.

Example #2 (Adequate Insurance)

When:

The value of the property is:

$ 250,000

The Coinsurance percentage for it is: 80%

The Limit of Insurance for it is:

$ 200,000

The Deductible is:

$250

The amount of loss is:

$40,000

The minimum amount of insurance to meet your

Coinsurance requirement is $200,000 ($250,000 x

80%). Therefore, the Limit of Insurance in this

example is adequate and no penalty applies. We will

pay no more than $39,750 ($40,000 amount of loss

minus the deductible of $250).

b.

If one Limit of Insurance applies to two or

more separate items, this condition will

apply to the total of all property to which

the limit applies.

Example #3

When:

The value of the property is:

Building at Location #1:

$75,000

Building at Location #2:

$100,000

App.100a

Personal Property at Location #2: $75,000

_________

$250,000

The Coinsurance percentage for it is: 90%

The Limit of Insurance for

Buildings and Personal Property

at Locations #1 and #2 is:

$180,000

The Deductible is:

$1,000

The amount of loss is:

Building at Location #2:

$30,000

Personal Property at Location #2:

$20,000

_________

$ 50,000

Step (1): $250,000 x 90% = $225,000

(the minimum amount of insurance to meet

your Coinsurance requirements and to avoid

the penalty shown below)

Step (2): $180,000 = $225,000 = .80

Step (3): $50,000 x .80 = $40,000

Step (4): $40,000—$1,000 = $39,000

We will pay no more than $39,000. The

remaining $11,000 is not covered.

2. Mortgageholders

a.

The term mortgageholder includes trustee.

b.

We will pay for covered loss of or damage to

buildings

or

structures

to

each

mortgageholder shown in the Declarations

App.101a

in their order of precedence, as interests

may appear.

c.

The mortgageholder has the right to receive

loss payment even if the mortgageholder

has started foreclosure or similar action on

the building or structure.

d.

If we deny your claim because of your acts

or because you have failed to comply with

the terms of this Coverage Part, the

mortgageholder will still have the right to

receive loss payment if the mortgageholder:

(1) Pays any premium due under this

Coverage Part at our request if you

have failed to do so;

(2) Submits a signed, sworn proof of loss

within 60 days after receiving notice

from us of your failure to do so; and

(3) Has notified us of any change in

ownership, occupancy or substantial

change in risk known to the

mortgageholder.

All of the terms of this Coverage Part will

then apply directly to the mortgageholder.

e.

If we pay the mortgageholder for any loss or

damage and deny payment to you because

of your acts or because you have failed to

comply with the terms of this Coverage

Part:

(1) The mortgageholder’s rights under the

mortgage will be transferred to us to

the extent of the amount we pay; and

App.102a

(2) The mortgageholder’s right to recover

the full amount of the mortgageholder’s

claim will not be impaired.

At our option, we may pay to the mortgageholder the whole principal on the mortgage

plus any accrued interest. In this event,

your mortgage and note will be transferred

to us and you will pay your remaining

mortgage debt to us.

f.

If we cancel this policy, we will give written

notice to the mortgageholder at least:

(1) 10 days before the effective date of

cancellation it we cancel for your

nonpayment of premium; or

(2) 30 days before the effective date of

cancellation if we cancel for any other

reason.

g.

G.

If we elect not to renew this policy, we will

give written notice to the mortgageholder at

least 10 days before the expiration date of

this policy.

Optional Coverages

If shown as applicable in the Declarations, the

following Optional Coverages apply separately to

each item.

1. Agreed Value

(a) The Additional Condition, Coinsurance,

does not apply to Covered Property to which

this Optional Coverage applies. We will pay

no more for loss of or damage to that

App.103a

property than the proportion that the Unit

of Insurance under this Coverage Part for

the property bears to the Agreed Value

shown for it in the Declarations.

(b) If the expiration date for this Optional

Coverage shown in the Declarations is not

extended, the Additional Condition, Coinsurance, is reinstated and this Optional Coverage

expires.

(c) The terms of this Optional Coverage apply

only to loss or damage that occurs:

(1) On or after the effective dale of this

Optional Coverage; and

(2) Before the Agreed Value expiration

date shown in the Declarations or the

policy expiration date, whichever

occurs first.

2. Inflation Guard

a.

The Limit of Insurance for property to

which this Optional Coverage applied will

automatically increase by the annual

percentage shown in the Declarations.

b.

The amount of increase will be:

(1) The Limit of Insurance that applied on

the most recent of the policy inception

date, the policy anniversary date, or

any other policy change amending the

Limit of Insurance, times

(2) The percentage of annual increase

shown in the Declarations, expressed

as a decimal (example: 8% is .08), times

App.104a

(3) The number of days since the

beginning of the current policy year or

the effective date of the most recent

policy change amending the Limit of

Insurance, divided by 365.

Example

If:

The applicable Unit of Insurance is: $100,000

The annual percentage increase is:

8%

The number of days since the

beginning of the policy year

(or last policy change) is:

146

The amount of increase is:

$100,000 x .08 x 146 365 =

$ 3,200

3. Replacement Cost

a.

Replacement Cost (without deduction for

depreciation) replaces Actual Cash Value in

the Valuation Loss Condition of this

Coverage Form.

b.

This Optional Coverage does not apply to:

(1) Personal property of others;

(2) Contents of a residence;

(3) Works of art, antiques or rare articles,

including etchings, pictures, statuary,

marbles, bronzes, porcelains and bric-abrac; or

(4) “Stock”, unless the Including “Stock”

option is shown in the Declarations.

App.105a

Under the terms of this Replacement

Cost Optional Coverage, tenants’

improvements and betterments are not

considered to be the personal property

of others.

c.

You may make a claim for loss or damage

covered by this insurance on an actual cash

value basis instead of on a replacement cost

basis. In the event you elect to have loss or

damage settled on an actual cash value

basis, you may still make a claim for the

additional coverage this Optional Coverage

provides if you notify us of your intent to do

so within 180 days after the loss or damage.

d.

We will not pay on a replacement cost basis

for any loss or damage:

(1) Until the lost or damaged property is

actually repaired or replaced; and

(2) Unless the repairs or replacement are

made as soon as reasonably possible

after the loss or damage.

With respect to tenants' improvements and

betterments, the following also apply:

(3) If the conditions in d.(1) and d.(2) above

are not met, the value of tenants'

improvements and betterments will be

determined as a proportion of your

original cost, as set forth in the

Valuation Loss Condition of this

Coverage Form; and

(4) We will not pay for loss or damage to

tenants' improvements and better-

App.106a

ments if others pay for repairs or

replacement.

e.

We will not pay more for loss or damage on

a replacement cost basis than the least of

(1), (2) or (3), subject to f. below:

(1) The Limit of Insurance applicable to

the lost or damaged property;

(2) The cost to replace the lost or damaged

property with other property:

(a) Of comparable

quality; and

material

and

(b) Used for the same purpose; or

(3) The amount actually spent that is

necessary to repair or replace the lost

or damaged property.

If a building is rebuilt at a new premises,

the cost described in e.(2) above is limited to

the cost which would have been incurred if

the building had been rebuilt at the original

premises.

f.

The cost of repair or replacement does not

include the increased cost attributable to

enforcement of any ordinance or law

regulating the construction, use or

4. Extension of Replacement Cost to Personal

Property of Others

a.

If the Replacement Cost Optional Coverage

is shown as applicable in the Declarations,

then this Extension may also be shown as

applicable, If the Declarations show this

App.107a

Extension as applicable, then Paragraph

3.b.(1) of the Replacement Cost Optional

Coverage is deleted and all other provisions

of the Replacement Cost Optional Coverage

apply to replacement cost on personal

property of others.

b.

With respect to replacement cost on the

personal property of others, the following

limitation applies:

If an item(s) of personal property of others

is subject to a written contract which

governs your liability for loss or damage to

that item(s), then valuation of that item(s)

will be based on the amount for which you

are liable under such contract, but not to

exceed the lesser of the replacement cost of

the property or the applicable Limit of

Insurance.

H. Definitions

1. “Fungus” means any type or form of fungus,

including mold or mildew, and any mycotoxins,

spores, scents or by-products produced or released by

fungi.

2. “Pollutants” means any solid, liquid, gaseous

or thermal irritant or contaminant, including smoke,

vapor, soot, fumes, acids, alkalis, chemicals and

waste. Waste includes materials to be recycled,

reconditioned or reclaimed.

3. “Stock” means merchandise held in storage or

for sale, raw materials and in-process or finished

goods, including supplies used in their packing or

shipping.

App.108a

BUSINESS INCOME (AND EXTRA EXPENSE)

COVERAGE FORM

Commercial Property

CP 00 30 06 07

________________________

Various provisions in this policy restrict coverage. Read the entire policy carefully to determine

rights, duties and what is and is not covered.

Various provisions in this policy restrict coverage. Read the entire policy carefully to determine

rights, duties and what is and is not covered.

Throughout this policy the words ‘you” and

‘your” refer to the Named Insured shown in the

Declarations. The words ‘We”, “us” and “our” refer to

the Company providing this insurance.

Other words and phrases that appear in quotation marks have special meaning. Refer to Section F.,

Definitions.

A.

Coverage

1. Business Income

Business Income means the:

a.

Net Income (Net Profit or Loss before

income taxes) that would have been earned

or incurred; and

b.

Continuing normal operating

incurred, including payroll.

expenses

For manufacturing risks, Net Income

includes the net sales value of production.

App.109a

Coverage is provided as described and

limited below for one or more of the

following options for which a Limit of

Insurance is shown in the Declarations:

(1) Business Income Including “Rental

Value”.

(2) Business Income Other Than “Rental

Value”.

(3) “Rental Value”.

If option (1) above is selected, the term Business

Income will include ‘Rental Value”. If option (3)

above is selected, the term Business Income will

mean ‘Rental Value” only.

If Limits of Insurance are shown under more

than one of the above options, the provisions of this

Coverage Part apply separately to each.

We will pay for the actual loss of Business Income

you sustain due to the necessary “suspension” of your

“operations” during the “period of restoration”. The

“suspension” must be caused by direct physical loss

of or damage to property at premises which are

described in the Declarations and for which a Business

Income Limit of Insurance is shown in the Declarations. The loss or damage must be caused by or

result from a Covered Cause of Loss. With respect to

loss of or damage to personal property in the open or

personal property in a vehicle, the described premises

include the area within 100 feet of the site at which

the described premises are located.

With respect to the requirements set forth in

the preceding paragraph, if you occupy only part of

App.110a

the site at which the described premises are located,

your premises means:

(a) The portion of the building which you rent,

lease or occupy; and

(b) Any area within the building or on the site

at which the described premises are located,

if that area services, or is used to gain

access to, the described premises.

2. Extra Expense

a. Extra Expense Coverage is provided at the

premises described in the Declarations only if the

Declarations show that Business Income Coverage

applies at that premises.

b. Extra Expense means necessary expenses you

incur during the “period of restoration” that you

would not have incurred if there had been no direct

physical loss or damage to property caused by or

resulting from a Covered Cause of Loss.

We will pay Extra Expense (other than the

expense to repair or replace property) to:

(1) Avoid or minimize the “suspension” of

business and to continue operations at the

described premises or at replacement

premises or temporary locations, including

relocation expenses and costs to equip and

operate the replacement location or temporary location.

(2) Minimize the ‘‘suspension” of business if

you cannot continue “operations”.

We will also pay Extra Expense to repair or

replace property, but only to the extent it reduces the

App.111a

amount of loss that otherwise would have been

payable under this Coverage Form.

3. Covered Causes of Loss, Exclusions and

Limitations

See applicable Causes of Loss Form as shown in

the Declarations.

4. Additional

Limitation—Interruption

Computer Operations

of

a. Coverage for Business Income does not apply

when a “Suspension” of “operations” is caused by

destruction or corruption of electronic data, or any

loss or damage to electronic data, except as provided

under the Additional Coverage—Interruption of

Computer Operations.

b. Coverage for Extra Expense does not apply

when action is taken to avoid or minimize a ‘Suspension” of “operations” caused by destruction or

corruption of electronic data, or any loss or damage

to electronic data, except as provided under the

Additional Coverage—Interruption of Computer

Operations.

c. Electronic data means information, facts or

computer programs stored as or on, created or used

on, or transmitted to or from computer software

(including systems and applications software), on

hard or floppy disks, CD-ROMs, tapes, drives, cells,

data processing devices or any other repositories of

computer software which are used with electronically

controlled equipment. The term computer programs,

referred to in the foregoing description of electronic

data, means a set of related electronic instructions

App.112a

which direct the operations and functions of a

computer or device connected to it, which enable the

computer or device to receive, process, store, retrieve

or send data.

5. Additional Coverages

a. Civil Authority

In this Additional Coverage—Civil Authority,

the described premises are premises to which this

Coverage Form applies, as shown in the

Declarations.

When a Covered Cause of Loss causes damage

to property other than property at the described

premises, we will pay for the actual loss of Business

Income you sustain and necessary Extra Expense

caused by action of civil authority that prohibits

access to the described premises, provided that both

of the following apply:

(1) Access to the area immediately surrounding

the damaged property is prohibited by civil

authority as a result of the damage, and the

described premises are within that area but

are not more than one mile from the

damaged property; and

(2) The action of civil authority is taken in

response to dangerous physical conditions

resulting from the damage or continuation

of the Covered Cause of Loss that caused

the damage, or the action is taken to enable

a civil authority to have unimpeded access

to the damaged property.

App.113a

Civil Authority Coverage for Business Income

will begin 72 hours after the time of the first action

of civil authority that prohibits access to the

described premises and will apply for a period of up

to four consecutive weeks from the date on which

such coverage began.

Civil Authority Coverage for Extra Expense will

begin immediately after the time of the first action of

civil authority that prohibits access to the described

premises and will end:

(1) Four consecutive weeks after the dale of

that action; or

(2) When your Civil Authority Coverage for

Business Income ends; whichever is later.

b. Alterations and New Buildings

We will pay for the actual loss of Business

Income you sustain and necessary Extra Expense

you incur due to direct physical loss or damage at the

described premises caused by or resulting from any

Covered Cause of Loss to:

(1) New buildings or structures, whether complete or under construction;

(2) Alterations or additions to existing buildings or structures; and

(3) Machinery, equipment, supplies or building

materials located on or within 100 feet of

the described premises and:

(a) Used in the construction, alterations or

additions; or

App.114a

(b) Incidental to the occupancy of new

buildings.

If such direct physical loss or damage delays the

start of “operations”, the “period of restoration” for

Business Income Coverage will begin on the date

“operations” would have begun if the direct physical

loss or damage had not occurred.

c. Extended Business Income

(1) Business Income

“Rental Value”

Other

Than

If the necessary “suspension” of your

“operations” produces a Business Income loss

payable under this policy, we will pay for the actual

loss of Business Income you incur during the period

that:

(a) Begins on the date property (except

“finished stock”) is actually repaired, rebuilt

or replaced and “operations” are resumed;

and

(b) Ends on the earlier of:

(i)

The date you could restore your

“operations”, with reasonable speed, to

the level which would generate the

business income amount that would

have existed if no direct physical loss or

damage had occurred; or

(ii) 30 consecutive days after the date

determined in (1)(a) above.

However, Extended Business Income does not

apply to loss of Business Income incurred as a result

App.115a

of unfavorable business conditions caused by the

impact of the Covered Cause of Loss in the area

where the described premises are located.

Loss of Business Income must be caused by

direct physical loss or damage at the described

premises caused by or resulting from any Covered

Cause of Loss.

(2) “Rental Value”

If the necessary “suspension” of your

“operations” produces a “Rental Value” loss payable

under this policy, we will pay for the actual loss of

‘Rental Value” you incur during the period that:

(a) Begins on the date property is actually

repaired, rebuilt or replaced and tenantability is restored; and

(b) Ends on the earlier of:

(i)

The date you could restore tenant

occupancy, with reasonable speed, to

the level which would generate the

“Rental Value” that would have existed

if no direct physical loss or damage had

occurred; or

(ii) 30 consecutive days after the date

determined in (2)(a) above.

However, Extended Business Income does not

apply to loss of “Rental Value” incurred as a result of

unfavorable business conditions caused by the

impact of the Covered Cause of Loss in the area

where the described premises are located.

Loss of “Rental Value” must be caused by direct

physical loss or damage at the described premises

App.116a

caused by or resulting from any Covered Cause of

Loss.

d. Interruption of Computer Operations

(1) Under this Additional Coverage, electronic

data has the meaning described under Additional

Limitation—Interruption of Computer Operations.

(2) Subject to all provisions of this Additional

Coverage, you may extend the insurance that applies

to Business Income and Extra Expense to apply to a

“suspension” of “operations” caused by an

interruption in computer operations due to

destruction or corruption of electronic data due to a

Covered Cause of Loss.

(3) With respect to the coverage provided under

this Additional Coverage, the Covered Causes of Loss

are subject to the following:

(a) If the Causes of Loss—Special Form applies,

coverage under this Additional Coverage—

Interruption of Computer Operations is

limited to the "specified causes of loss" as

defined in that form, and Collapse as set

forth in that form.

(b) If the Causes of Loss—Broad Form applies,

coverage under this Additional Coverage—

Interruption of Computer Operations

includes Collapse as set forth in that form.

(c) If the Causes of Loss Form is endorsed to

add a Covered Cause of Loss, the additional

Covered Cause of Loss does not apply to the

coverage provided under this Additional

App.117a

Coverage—Interruption of Computer Operations.

(d) The Covered Causes of Loss include a virus,

harmful code or similar instruction introduced into or enacted on a computer system

(including electronic data) or a network to

which it is connected, designed to damage

or destroy any part of the system or disrupt

its normal operation. But there is no coverage

for an interruption related to manipulation

of a computer system (including electronic

data) by any employee, including a temporary

or leased employee, or by an entity retained

by you or for you to inspect, design, install,

maintain, repair or replace that system.

(e) The most we will pay under this Additional

Coverage—Interruption of Computer Operations is $2,500 for all loss sustained and

expense incurred in any one policy year,

regardless of the number of interruptions or

the number of premises, locations or

computer systems involved. If loss payment

relating to the first interruption does not

exhaust this amount, then the balance is

available for loss or expense sustained or

incurred as a result of subsequent interruptions in that policy year. A balance remaining

at the end of a policy year does not increase

the amount of insurance in the next policy

year. With respect to any interruption which

begins in one policy year and continues or

results in additional loss or expense in a

subsequent policy year(s), all loss and

expense is deemed to be sustained or

App.118a

incurred in the policy year in which the

interruption began.

(5) This Additional Coverage—Interruption in

Computer Operations does not apply to loss

sustained or expense incurred after the end of the

“period of restoration”, even if the amount of

insurance stated in (4) above has not been

exhausted.

6. Coverage Extension

If a Coinsurance percentage of 50% or more is

shown in the Declarations, you may extend the

insurance provided by this Coverage Part as follows:

NEWLY ACQUIRED LOCATIONS

a. You may extend your Business Income and

Extra Expense Coverages to apply to property at any

location you acquire other than fairs or exhibitions.

b. The most we will pay under this Extension,

for the sum of Business Income loss and Extra

Expense incurred, is $100,000 at each location.

c. Insurance under this Extension for each

newly acquired location will end when any of the

following first occurs:

(1) This policy expires;

(2) 30 days expire after you acquire or begin to

construct the property; or

(3) You report values to us.

We will charge you additional premium for

values reported from the date you acquire

the property.

App.119a

The Additional Condition, Coinsurance, does not

apply to this Extension.

B.

Units of Insurance

The most we will pay for loss in any one

occurrence is the applicable Limit of Insurance

shown in the Declarations.

Payments under the following coverages will not

increase the applicable Limit of Insurance:

1. Alterations and New Buildings;

2. Civil Authority;

3. Extra Expense; or

4. Extended Business Income.

The amounts of insurance stated in the

Interruption of Computer Operations Additional

Coverage and the Newly Acquired Locations

Coverage Extension apply in accordance with the

terms of those coverages and are separate from the

Limit(s) of Insurance shown in the Declarations for

any other coverage.

C.

Loss Conditions

The following conditions apply in addition to the

Common Policy Conditions and the Commercial

Property Conditions.

1. Appraisal

If we and you disagree on the amount of Net

Income and operating expense or the amount of loss,

either may make written demand for an appraisal of

the loss. In this event, each party will select a

competent and impartial appraiser.

App.120a

The two appraisers will select an umpire. If they

cannot agree, either may request that selection be

made by a judge of a court having jurisdiction. The

appraisers will state separately the amount of Net

Income and operating expense or amount of loss. If

they fail to agree, they will submit their differences

to the umpire. A decision agreed to by any two will

be binding. Each party will:

a.

Pay its chosen appraiser; and

b.

Bear the other expenses of the appraisal

and umpire equally.

If there is an appraisal, we will still retain our

right to deny the claim.

2. Duties in The Event Of Loss

a.

You must see that the following are done in

the event of loss:

(1) Notify the police if a law may have

been broken.

(2) Give us prompt notice of the direct

physical loss or damage. Include a

description of the property involved.

(3) As soon as possible, give us a

description of how, when, and where

the direct physical loss or damage

occurred.

(4) Take all reasonable steps to protect the

Covered Property from further damage,

and keep a record of your expenses

necessary to protect the Covered Property, for consideration in the settlement

of the claim. This will not increase the

App.121a

Limit of Insurance. However, we will

not pay for any subsequent loss or

damage resulting from a cause of loss

that is not a Covered Cause of Loss.

Also, if feasible, set the damaged

property aside and in the best possible

order for examination.

(5) As often as may be reasonably

required, permit us to inspect the

property proving the loss or damage

and examine your books and records.

Also permit us to take samples of

damaged and undamaged property for

inspection, testing and analysis, and

permit us to make copies from your

books and records.

(6) Send us a signed, sworn proof of loss

containing the information we request

to investigate the claim. You must do

this within 60 days after our request.

We will supply you with the necessary

forms.

(7) Cooperate with us in the investigation

or settlement of the claim.

(8) If you intend to continue your business,

you must resume all or part of your

“operations” as quickly as possible.

b.

We may examine any insured under oath,

while not in the presence of any other

insured and at such times as may be

reasonably required, about any matter

relating to this insurance or the claim,

App.122a

including an insured’s books and records. In

the event of an examination, an insured’s

answers must be signed.

3. Loss Determination

a. The amount of Business Income loss will be

determined based on:

(1) The Net Income of the business before the

direct physical loss or damage occurred;

(2) The likely Net Income of the business if no

physical loss or damage had occurred, but

not including any Net Income that would

likely have been earned as a result of an

increase in the volume of business due to

favorable business conditions caused by the

impact of the Covered Cause of Loss on

customers or on other businesses;

(3) The operating expenses, including payroll

expenses, necessary to resume “operations”

with the same quality of service that existed

just before the direct physical loss or

damage; and

(4) Other relevant sources of information,

including:

(a) Your financial records and accounting

procedures;

(b) Bills, invoices and other vouchers; and

(c) Deeds, liens or contracts.

b. The amount of Extra Expense will be

determined based on:

App.123a

(1) All expenses that exceed the normal

operating expenses that would have been

incurred by “operations” during the “period

of restoration” if no direct physical loss or

damage had occurred. We will deduct from

the total of such expenses:

(a) The salvage value that remains of any

property bought for temporary use

during the “period of restoration”, once

“operations” are resumed; and

(b) Any Extra Expense that is paid for by

other insurance, except for insurance

that is written subject to the same

plan, terms, conditions and provisions

as this insurance; and

(2) Necessary expenses that reduce the

Business Income loss that otherwise would

have been incurred.

c. Resumption Of Operations

We will reduce the amount of your:

(1) Business Income loss, other than Extra

Expense, to the extent you can resume your

“operations”, in whole or in part, by using

damaged or undamaged property (including

merchandise or stock) at the described

premises or elsewhere.

(2) Extra Expense loss to the extent you can

return “operations” to normal and

discontinue such Extra Expense.

d. If you do not resume “operations”, or do not

resume “operations” as quickly as possible, we will

App.124a

pay based on the length of time it would have taken

to resume “operations” as quickly as possible.

4. Loss Payment

We will pay for covered loss within 30 days after

we receive the sworn proof of loss, if you have

complied with all of the terms of this Coverage Part

and:

D.

a.

We have reached agreement with you on

the amount of loss; or

b.

An appraisal award has been made.

Additional Condition

COINSURANCE

If a Coinsurance percentage is shown in the

Declarations, the following condition applies in

addition to the Common Policy Conditions and the

Commercial Property Conditions.

We will not pay the full amount of any Business

Income loss if the Limit of Insurance for Business

Income is less than:

1.

The Coinsurance percentage shown for

Business Income in the Declarations; times

2.

The sum of:

(a) The Net Income (Net Profit or Loss

before income taxes), and

b.

Operating expenses, including payroll

expenses, that would have been earned

or incurred (had no loss occurred) by

your “operations” at the described

premises for the 12 months following

App.125a

the inception, or last previous anniversary dale, of this policy (whichever is

later).

Instead, we will determine the most we will pay

using the following steps:

Step (1):

Multiply the Net Income and operating

expense for the 12 months following the

inception, or last previous anniversary date,

of this policy by the Coinsurance percentage;

Step (2):

Divide the Limit of Insurance for the

described premises by the figure determined in Step (1); and

Step (3):

Multiply the total amount of loss by the

figure determined in Step (2).

We will pay the amount determined in Step (3)

or the limit of insurance, whichever is less. For the

remainder, you will either have to rely on other

insurance or absorb the loss yourself.

In determining operating expenses for the

purpose of applying the Coinsurance condition, the

following expenses, if appl

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